The aim of real-time information (RTI) is to reduce administration costs and improve the accuracy of PAYE by requiring employers to submit PAYE information with each payroll run, instead of sending it at the end of a tax year.

This will include all payroll frequencies such as monthly and weekly and is due to go live from April 2013, with full implementation for all employers by October 2013.

Although RTI is supported in the main, there are a lot of concerns around the method and the timetable for introduction. HMRC’s solution is for all who submit payments via Bacs to submit a data file attached to the payment file.

HMRC requires the information to track deductions in respect of PAYE, national insurance (NI) and statutory payments/deductions and to assess tax credits, while the Department for Work and Pensions requires the information for the introduction of the new universal credits benefits system.

Is Bacs the only way?

HMRC has provided internet specifications to ensure those employers who do not use Bacs to pay their employees can submit their RTI data file. HMRC has also confirmed that the EDI channel will be available until at least 2014.

However, another problem arises from this. For those payroll bureau/software providers which offer their clients EDI and internet channels for submitting their end-of year and/or in-year returns, do they develop both internet and EDI channels to then have to develop the Bacs specification when ready; or do they only offer their clients the internet solution which will be available longer term for those who don’t use Bacs?

Where payroll agents batch their payments, does this mean they will need to split them out and send individual files? Employers are justifiably upset by the Bacs solution as not only did they spend a lot of money preparing to submit information online to HMRC, they are now going to have to invest again.

HMRC has made it clear that any Bacs development costs will be covered by them but this does not negate the software change costs which will be the employer’s responsibility.

Many cannot understand why the current online filing solutions cannot be used. Bye-bye P45s and P14s?

The original consultation proposed that RTI may lead the way to the removal of the end-of-year forms, such as the P14 and in-year reporting such as the P45. It is the expectation of employers that these processes will be removed and replaced with a full electronic method. However, the original cost model in the proposal stated a massive cost reduction and admin burden for employers would be in the removal of the P45/P46 process. This view is not shared by many as the cost was based on times when paper forms were processed and not dealt with electronically. So is there really a cost saving for the employer?

Another area not covered in the proposals is the processing of P11Ds. If RTI is to save costs and admin time why would you not put benefits through the payroll system and charge tax and NI where appropriate in real time? Maybe if the tax and NI integration programme happens it might pave the way for this.

Amendments and overpayments

HMRC has produced some customer scenarios now to help software understand what the process might be for adjustments. It is hoped that adjustments will be dealt with in a practical manner but the devil will be in the detail as these issues are ironed out.

 

By Karen Thomson

Associate director of policy, research and strategic visibility at the Chartered Institute of Payroll Professionals