Back in April 2013 HMRC introduced Real Time Information (RTI) PAYE reporting, a new system designed to improve the accuracy of returns while ensuring employers such as yourself are paying the correct amount of tax.
Unlike in the previous system whereby you would submit an end of year return to HMRC with the full tax liability of each employee, under RTI PAYE reporting you’re required to submit information to HMRC regarding employee pay and deductions each time a payment is made – unless you employ fewer than fifty employees and some are paid more frequently than once a month.
In this scenario you can send your RTI report (known as full payment submission – FPS), to HMRC when you run your monthly payroll, not every time you pay an employee. It should be noted this is only a temporary relaxation.
Though RTI for SMEs was introduced in April 2013, HMRC has been phasing in the system and employers with less than 50 employees have been given an additional year (to April 2014) in which to switch over to, and familiarise themselves with the new reporting system before any interest and penalties are to apply.
For this reason, if you don’t yet report in real time HMRC are encouraging you to make the change as soon as possible in order to avoid automated penalties and interest that will fall upon you come April 2014 if you’ve still not moved across to the new system.
The exception to this is ‘micro businesses’ with nine or fewer employees who have been given a further two year extension to comply with new RTI reporting requirements. Existing micro employers have until April 2016 to adapt their processes and report payments in real time.
Top Tips on RTI for SMEs
If you’re preparing to start reporting PAYE via RTI ahead of the April 2014 deadline, consider the following tips to make your transition as smooth as possible:
- Payments made to employees must be reported to HMRC ON or BEFORE payment day: Take note of how your company’s PAYE liability is paid over, as HMRC will now know the exact amount due each month due to data being sent in real time.
- Double check existing data ahead of moving across to RTI: It’s crucial that the information you hold in your payroll records is complete and exact. Verify and update (if necessary) all employee records with full and accurate details including names, dates of birth, national insurance numbers, addresses, and gender.
- Contact HMRC if you don’t pay an employee over a tax month: Even if you pay quarterly, you need to provide HMRC with at least one return each month using your payroll software, otherwise HMRC will estimate what you must pay each month and require you to pay it in full at the end of the quarter.
- Tell HMRC about any pay deductions: It’s up to you to make HMRC aware of deductions from pay such as statutory sick pay or maternity pay, otherwise they will require you to pay the full amount you’ve deducted from your employees.
- Check your PAYE liabilities and payments online: Check what HMRC’s records show you owe by logging into HMRC’s online PAYE Liabilities and Payments viewer. Generally, HMRC tends to update the amount you owe on the sixth and twentieth of each month (based on the returns they’ve received from you before these dates).
- To avoid building up PAYE debits you can’t meet, ensure you submit returns on time and in full: If you’re paying taxes quarterly, ensure you submit your returns well before their individual deadlines.
RTI for SMEs Reporting
To speak with a professional regarding accurate RTI for SMEs, PAYE reporting and management within your business, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.