Real Time Information (RTI) will radically alter the way employers report PAYE information to HMRC. AAT fellow member, Ian Whyteside, offers his guide to RTI and outlines how AAT has responded to a consultation on the initiative.
Real Time Information (RTI) has been introduced to improve the PAYE system by assisting HMRC in gathering critical data on a more frequent basis, and reconciling the income tax and national insurance deductions with payments. RTI builds on the work already done with the introduction of the National Insurance and PAYE Service (NPS).
Most employers and pension providers will be ‘legally required’ to report payroll information using RTI from April 2013 and nearly all employers should be able to file using RTI by the end of September next year.
The major problem which concerns us with RTI is that businesses will have to incur additional costs to implement and maintain it. These additional costs may discourage smaller businesses from taking on more employees. Given that the Government is looking to the SME market to create employment and help lift the economy out of a double dip recession, it appears that RTI has come at a particularly bad time.
We do have to recognise that HMRC has to implement RTI in a very short timescale, which is no easy task. Feedback from one AAT member involved in the RTI pilot suggested that the problem for agents will be getting their clients organised, rather than having problems filing PAYE in real time.
The member added that HMRC’s systems appeared to be working fine, but that there may be hiccups in the first peak periods at the end of the first week in April when the weekly payrolls are submitted, or at the end of April for the monthly payrolls.
In the consultation, it was also clear that without penalties there would be no incentive for businesses to comply with the requirements. We therefore felt there was justification for a penalty regime:
- that is effective whereby employers are promptly notified when they have failed to comply
- where the level of the penalty is broadly proportionate and acknowledges where the employer has previously compliant behaviour
- that is fair and equitable and meets the stated desire of correcting non-compliant behaviour
- that works operationally, for example we recommended that employers should submit nil returns which is easier than appealing against a penalty
In our response, we mentioned that employers would be ‘legally required’ to report payroll information using RTI. By that we mean that penalties will be levied on those employers who fail to comply with the scheme, and we are naturally concerned by this.
We are confident that the responses to the consultation will be used in order to develop a late filing penalty model for RTI that aims to improve overall compliance. According to the consultation document, HMRC will be publishing draft legislation covering these penalties for further consultation soon.
AAT will review the draft legislation and may choose to respond if there is a need for further amendments.
For more information on payroll, pensions and more click the image below
Ian Whyteside is a Partner at The Lime Partnership.