The introduction of RTI changed the way that businesses across the UK were required to report PAYE information to HMRC. Previously businesses only needed to report this information once a year, at year end. Under this new legislation however, businesses are legally required to submit this information electronically to HMRC “on or before” each payroll run. This means that for a business which pays its employees on a weekly basis, they are required to report PAYE information to HMRC 52 times a year, instead of just once.
Despite a successful pilot scheme prior to the April 2013 start date, many smaller businesses struggled to implement the new legislation. To try and ease the transition for these organisations HMRC introduced a relaxation policy for employers with less than 50 employees.
One of the most important considerations when reporting PAYE information in real time is data accuracy
Under this relaxation, certain employers are still required to submit RTI submissions to HMRC, but they can submit this information by the end of their standard payroll run, rather than the usual “on or before” the payroll run. This relaxation was originally only meant to run up until 5th October 2013 but was later extended to 5th April 2014.
Now that this relaxation period is nearing its end, what does this mean for small businesses?
From April 2014, HMRC will be implementing a penalty scheme for late filing and late payments under RTI. These penalties will be applied when businesses fail to submit payroll information to HMRC using a Full Payment Submission (FPS), or if businesses have not informed HMRC that there are no salary payments made by submitting an Employer Payment Summary (EPS).
The size of the penalties in place for late filings will vary depending on the number of employees the business has, starting at £100.
For late payments, the penalties will be a percentage of the unpaid amount, which will increase in time.
While all of this may cause small businesses concern, with the right preparation and the correct systems and processes in place, the transition to RTI can be easy.
Many small businesses may still be confused by the rules; how best to process payrolls that are quarterly and the steps they need to take to complete the transition.
For businesses with simple payrolls that are already complying with RTI, the transition seems to have been relatively straightforward but those with more complex payroll requirements have struggled.
There are a number of steps businesses can take to make RTI compliance as simple as possible. Having payroll software which can handle your requirements is the most important. There is a range of free and paid-for payroll software options available to businesses, so before choosing which to implement in your business, it is vital to establish the functionality you will need to meet your requirements.
The introduction of RTI has led to a big increase in the number of small businesses downloading free payroll software from commercial providers, due to the restrictions introduced to the HMRC Online PAYE Tools. HMRC changed the functionality of this free tool while also changing the minimum system requirements. This meant that this tool was no longer a suitable option for many businesses.
One of the most important considerations when reporting PAYE information in real time is data accuracy. This is something that IRIS has been discussing since HMRC announced its plans to introduce RTI. Ensuring employee records are set up correctly and maintained with up-to-date records is very important in achieving compliance.
Some organisations struggled when making the transition to RTI as they failed to send an alignment submission to HMRC, leading to reconciliation problems. It is also key to remember to submit an EPS (Employer Payment Summary) for part payments or when employees require SSP (Statutory Sick Pay) recovery.
Even as the end of the relaxation looms closer, small businesses should not be too concerned, provided they are prepared.
By educating yourself on the legislation and ensuring you have payroll software in place which is flexible enough to handle your business requirements, ensuring compliance with RTI should not cause businesses any major problems.
Mark Paraskeva is CEO of IRIS SME division