Make sure you are ready to implement RTI
What is RTI?
RTI stands for Real Time Information. From 6 April 2013, most employers must report tax, national insurance and other deductions to HMRC on or before each pay day. The figures must be sent electronically as part of the payroll routine.
However, in a last-minute acknowledgement of the problems this causes some employers, HMRC this week announced a relaxation of the rules for those with fewer than 50 staff and who run the payroll monthly, but pay more frequently. These will temporarily be allowed to send information to HMRC by the date of their regular payroll run, but no later than the end of the tax month.
This would apply, for example, where a farm secretary visits monthly but employees get payments on account each week. This is a temporary measure until 5 October – electronic reporting will still be required for all payments made from 6 April. For more information see www.hmrc.gov.uk/news/rti-small-businesses.htm
Why has it been introduced?
RTI will make HMRC’s records more accurate and employees will be charged the correct amount of tax at the right time. From October 2013 it will also support the new universal credit system, identifying how much someone earns and how many hours they work.
Does it affect employees’ take-home pay?
No, but it will mean they are allocated the correct tax code almost immediately if their circumstances change.
Is there anything I should be doing now to get ready?
Yes, it is very important that employees’ details are correctly recorded. For example, full names are needed – no nicknames or initials – and correct birthdates.
Is there any extra information I need to record for existing employees?
The main extra piece of information needed is the “normal hours worked” for each employee. This may be their contracted hours plus any regular overtime.
What about new employees?
You will have to check that all new employees are who they say they are and that they are eligible for work in the UK. Ideally this proof of ID should be a passport, but an EU citizen card or driving licence would also do.
Do I have to buy a payroll program?
No. HMRC provides a free tool called Basic PAYE Tools that can be downloaded and is compatible with RTI. However, this is basic and is designed for small, simple payrolls. It does not produce payslips and cannot handle payments or deductions unrelated to PAYE, such as attachment of earnings orders.
Commercial software packages are available, but check that anything you choose is RTI-ready.
I only employ a couple of people – this won’t apply to me, will it?
If you are registered for PAYE then RTI applies, regardless of payroll size and amounts paid. There are rare concessions for religious objections and certain care workers, but these apply to electronic reporting, not operating RTI.
How do we deal with casual workers who only receive cash payment on the day of work – for example pickers/beaters?
Under RTI all casual workers must be included on the payroll. Pre-RTI they could be paid outside the payroll under certain conditions and, where applicable, declared on form P38A at year-end. There is now no P38A.
However, you may have up to seven days to report their pay, if all of the following apply to payments:
- Made to employees for work done on day of payment
- Made non-electronically (cash/cheque)
- Made at a time or place where it would be impractical to report “on or before” time of payment
- Where employer cannot know how much the payment will be in time to report information in advance of payment.
This includes where someone is employed to pick crops in a field and paid in cash based on the amount picked. It also includes catering staff paid by the hour at the end of a shift. If you are in any doubt as to whether this applies to your situation, please contact HMRC or look online.
Other casual employees must be paid in the same way as any other employee.