HMRC is planning to make the PAYE system more accurate. Its aims seem reasonable: it’s looking to drastically reduce the number of corrections it has to make for overpayment and underpayment. And it wants to slash the possibility of fraud. Sounds it should save us all a bit of money.
However, to achieve these aims, HMRC is making changes to how businesses supply them with payroll information. Currently, you only have to submit payroll returns once a year. Under the new system, you’ll have to do it every time you pay your employees.
The new system is called Real Time Information for Payroll (RTI) and it’ll be introduced from April next year**.
A PAYE admin nightmare?
It’s easy to see why this idea is attractive to HMRC. They receive up-to-date information each time you run payroll – they don’t have to wait a year between submissions. But at first glance this sounds like it could create lots more work for your average business.
If you pay employees weekly and monthly then you could end up submitting payroll information 52 times a year. Isn’t that going to be an admin nightmare?
Well, on reflection I think it might not be quite as bad as it sounds. Sure, the new system is going to take some adjusting too (it’ll become compulsory by October next year), but the benefits could be felt way beyond the world of payroll.
Reduce the stress of year-end
Payroll year-end can be really stressful. Wading back through a year’s worth of data, reconciling reports, tracking down needle-in-a-haystack errors, trying to figure out when on earth you did ten months earlier … it might only happen annually, but for many businesses it’s a disruptive and confusing time of the year.
On the other hand, if you got into the habit of submitting payroll information more often, it’s much easier to be sure that the information you’re submitting is accurate. And in fact, it’s not a stretch to imagine that if submitting a payroll return was just a standard part of your payroll procedure – and built in to your payroll software - it could be quick and easy every week.
Benefits for everyone?
Beyond payroll, imagine a world where you get the benefits you deserve and are entitled to. Imagine calling HMRC and them actually being able to resolve your queries faster because they have access to up-to-date information. RTI will help deliver this.
It’s for these reasons that I believe RTI is absolutely the right thing to do to drag us all - screaming and kicking, probably - into the 21st century.
You can become RTI ready and help shape how HMRC and Sage provide on-going help and support by getting involved in our pilot scheme. If you are interested simply register for the register for the RTI pilot online and we’ll be in touch.
** After this article was published, HMRC announced a "relaxation of reporting arrangements for small businesses". According to HMRC: "Until 5 October 2013, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5th)."