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Real Time Information for Payroll

Real Time Information – RTI – HMRCs system for interchanging data with employers relating to employee Income Tax and NI under the PAYE (Pay as you Earn) system.

Historically:

  • Employers submitted data to HMRC annually in the well known P35/P14/P60 set of documents.
  • HMRC updated tax codes for individual tax payers annually, when allowances changed, or at other times if they received new information – a somewhat hit and miss system as HMRC never had up to date information about a taxpayers income and employment.
  • HMRC had little information about incorrect tax codes being applied in year, eg lost in the post, or employer error – these issues would come to light some months after the end of the tax year when employers returns were reconciled to tax payers individual records – a cause of delay and error.
  • It was difficult for HMRC to keep up with how much an employer had deducted from employees, and early interventions if, for example, an employer was diverting deductions were not possible.

RTI introduced a requirement for employers to make submissions to HMRC regular submissions electronically with details of staff paid, amounts and tax codes in use, so called “Real Time Information”.  These returns must be made “on or before” the staff are paid, so at the same frequency as payroll is run. (There was some relaxation of this in the initial years of RTI allowing small employers to report on a delayed basis monthly, those concessions have been phased out with the last ceasing at 5 April 2016).

From the RTI information HMRC should be able to identify quicker some of the problems outlined above, and arrange for tax codes to be updated in year if a tax payers circumstances change, track employer errors quicker, deal with employer non compliance.

The new regime came in from April 2013, backed by a penalty regime for late/missed/incomplete employer submissions.

There are other RTI stories and comment on our site: see them all here