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HMRC RTI Briefing and Impact – March 2013 onward

What is it?

RTI stands for Real Time Information, and is HMRCs initiative for reporting of payroll information in real time.

There is a background page on our web site:

https://www.whitefieldtax.co.uk/real-time-information/

Main requirements

– covers all payroll information – company directors, staff, casual workers

– applies to all payroll payments – broadly salary, wages, bonuses etc – it does not apply to dividends or business profits

– will need to submit details to HMRC at or before time of payment – this will necessitate your agreeing to take a salary on the same day every month and for ease, this should be the last working day of each month. We will report the figures to HMRC a few days before this every month

– submissions need to include amount to be paid and hours worked (banded up to 16, 16 to 30 and over 30) although where the hours are not regular, we can enter ‘other’ in pace of the number of hours

Practical implications

– for most of our clients we will look after RTI for you – unless you do your own payroll

– although we hope for a “light touch” regime to start with, HMRCs penalty powers are greatly expanded, not in the least through more regular submissions giving more chance for breaches to occur

– we will need to make your RTI submissions “on or before” each payment you make.

For director only payroll clients (most clients) – we intend to report at the middle of each month. We will contact you at the beginning of each month to remind you that payment needs to be made that month and this will give you a few days opportunity to let us know if there are any changes necessary for that month.(e.g. salary stopping, new employee or employee leaving etc) (NB director only schemes cover companies with directors, secretary, etc, and where we pre process information with few in year changes, and the cost is bundled into your annual fee)

For bureau payroll clients – the submission will be dealt with when we process each weekly / monthly payroll on bespoke timescales (NB bureau payroll covers arrangements where we prepare regular payslips for a number of staff, with details changing each pay period and we charge separately)

– There will inevitably be a period of bedding in regarding data flows between us and our clients – we will try and keep things as flexible as possible.

– HMRC will have enhanced information coming to them. We don’t view this malevolently, eg we don’t see it as a source of IR35 or NMW (directors) questioning, however data inconsistencies could well lead to a flurry of erroneous tax codes and other auto generated communications.

– In past years we sometimes found that clients on director only schemes had not followed our net monthly pay instructions and we had to amend figures at the end of the year. It will no longer be possible to do this. Once the month’s payment is reported to HMRC there is no amendment possible, so any diversion from the figures supplied to you will be problematic – if you feel any changes are needed, these must be notified to us at the beginning of the month of payment.

– Suggestions have been made that RTI obligations, and costs, can be minimised by reducing salary frequency. We’ve considered this, but don’t feel its in clients interests to move to quarterly or annual salaries on director only payrolls, partly due to the interaction with the benefits and NI system (both short term and long term, eg state pension entitlement), and partly due to difficulties previously experienced with HMRC failing to properly manage annual payrolls, leading to erroneous penalties, incorrectly closed records, tax code problems and similar. We feel the extra costs of monthly processing are a safer option.

Cost implications

RTI brings some cost implications for us.

Whilst its largely a technology driven process – with a necessary investment – we also have considerable increased responsibilities around getting the data into the technology and making sure it is correct for processing – its not difficult to see that this is the human end of the process, and likely to be time consuming if clients needs are to be handled individually.

Equally the RTI agenda is on the back of HMRC reducing back office staff by transferring responsibilities – and risk – to taxpayers and employers, along with attendant time and cost implications.

The last few years have seen a number of technology driven reporting changes stemming from HMRC, eg:

  • filing of SA returns online (all but compulsory now)
  • filing of employer returns online (compulsory, now being superseded by RTI)
  • filing of company tax returns online (compulsory)
  • iXBRL tagging of company accounts (compulsory)

Some of these have been easier than others, and generally we haven’t passed all, or sometimes any, of the costs on to clients. iXBRL tagged accounts, in particular, has been a significant challenge which we absorbed as a practice despite considerable cost and time overheads, and no small amount of stress and manual intervention.

RTI will mean us employing an extra person for data entry and processing.

We hope then that clients will realise the cost pressures on us from RTI and that, whilst we have tried to absorb some of them, an element we need to pass on, particularly on the back of having absorbed similar costs with iXBRL tagging.

Roadmap

During March 2013 we will need to check payroll and staff data for all clients, and be prepared to make so called “Alignment submissions” for clients. We will therefore be contacting you shortly to confirm all employee details.

  • During March 2013 we will also pre-process 2013-14 salary and payroll information for director only schemes, and send information to you
  • Start of April 2013 – first submission for Director only schemes (majority of our clients)
  • End of April 2013 – first submission for bureau payroll schemes
  • Start of May 2013 – second submission for Director only schemes
  • End of May 2013 – second submission for bureau payroll schemes
  • etc on a monthly basis

During April / May 2013 we also need to submit P35 employers end of year returns for clients for 2012/13, however this will be the last year of them – RTI supersedes them for 2013-14.

The annual P11D (return of benefits in kind) cycle doesn’t change – submit by 6 July for previous tax year.

Summary

Like anything new, RTI fills us with a degree of trepidation, and despite the best laid of plans doubtless there will be hiccups, some within our control, others not. As a practice we are committed to steering our clients though these with minimum of fuss.