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BIG changes to PAYE - Real Time Information

From chatting with my clients, I have come to realise that whilst everyone in the payroll industry would have to have been on a different planet over the last year or so not to have heard of RTI (Real Time Information), there has been very little communication to Employers in general regarding this BIGGEST change to PAYE since its introduction in 1944. So, perhaps an outline may be in order...

What is Real Time Information (RTI)?

All Employers currently send their PAYE information to HMRC at the end of the tax year. This is known as the P35 Employer Annual Return which is filed by 19th May each year. P60s for current employees are also generated at this time and distributed by 31st May each year.

Under this system, HMRC have always had problems keeping data up-to-date as they only receive this information once a year, at the end of the tax year. This is why employees are not advised of overpaid or underpaid tax until the following tax year.

Under RTI, this is all due to change as employers will be sending a return each time they pay their employees. That’s right….. Employers will be looking at sending information EVERY pay run they process. So that’s weekly for weekly payrolls, 2 weekly for 2 weekly payroll….. well, you get the picture.

This should mean that, over time, more people will pay the correct tax for the actual year they are in. However, this is also dependent on the quality and accuracy of the information that employers hold for their staff.

As an aside, RTI also supports the introduction of Universal Tax Credit when it is introduced in October 2013. Universal Credit will require up-to-date information about employment and pension income so that the Department for Work and Pensions (DWP) can adjust claimants’ welfare payments to reflect their circumstances. Good to know that Employers are assisting the government in this way……

Why fix it if it ain’t broke……

I think it is generally agreed that the current tax system is pretty archaic and not much has changed since its introduction in 1944. So the system does need to be modernised in the way it works. You only have to remember the uproar in the media last year when so many employees were issued with letters regarding underpayments and overpayments of tax to know that the system is definitely not working as it should.

So is this the best way to fix the system?

We are currently taking part in the HMRC pilot scheme testing the new system and so far have submitted an employee alignment submission. This process ensures that the employee records that HMRC and the Employer have match. Two weeks later, we are still waiting for this to be accepted and confirmed. …

We have been told by HMRC that RTI will be time saving for the Employer, however, I still have to work out how doing up to 52 submissions each year (or more if you run multi frequency payrolls!) will take less time than doing just the 1 at the end of the tax year. I wait to be convinced.

How will this affect Employers?

Employers need to hold accurate and up to date information on all their employees. HMRC published information recently on the data sent each year on P14’s (the Revenue copy of an employees’ P60). For example, there were over 500 submissions on employees’ called A.N.Other, and over 2000 employees with the NI Number of AB123456.

RTI or not, it goes without saying that you should have at least the following information on your employees:

FULL name (not just initials or their ‘friendly’ name eg Maggie, Dave)
Date of Birth (the real one, not 1.1.1901)
National Insurance number ( don’t make one up as the above or base it on the date of birth!)

In readiness for the Universal Credits, we will also need to record their contractual hours. DWP will want to know in three bands how many hours the employee works each week. This would be:

Up to 15.99 hours
16 to 29.99 hours
30 hours or more
Other - for those that work sporadically

Employees will also need to be aware that for any change in circumstances eg change of address/change of name, then they will have to inform HMRC or the employer’s submission may well reject!! When was the last time you told HMRC that you had moved!? I am still awaiting clarification from HMRC RTI department on this one ….

So, Employers, be aware….. this IS happening and WILL happen to you by October 2013 at the very latest. In fact, most employers will be encouraged to do this in April 2013. Make the most of your P35 for 2012/13 as it will be the last time you will file it!!!


Universal Credit works for employers

Universal Credit will increase the financial benefits of work and provide employers like you with a more flexible workforce.

What is Universal Credit?

Universal Credit is a new single monthly payment for people who are on a low income or out of work. It ends the 16 hour a week rule that may previously have led people to restrict the hours they work to avoid losing their benefits.

Universal Credit aims to ensure that people will be better off in work than on benefits. This means claimants won’t lose all their benefits at once if they are on a low income as their Universal Credit payment will reduce gradually as their take home pay increases.

How does it affect my business?

Universal Credit will have a positive effect on your business as you will:

• find it easier to fill any job as more jobseekers will be willing to consider short term or irregular work

• be able to identify opportunities for flexible working using your existing part time employees for overtime and extra shifts at peak times, without the overheads associated with recruiting and training new staff

• have access to a wider pool of applicants for your jobs, many of whom are registered on our Universal Jobmatch service, to help you fill your job vacancies more quickly

As Universal Credit rolls out nationally, some of your employees may start to receive it, or you may recruit someone who is receiving it.

Universal Credit payments are linked to how much money an employed Universal Credit claimant has earned. This is captured through the new way of reporting PAYE information to Her Majesty’s Revenue and Customs (HMRC) in real time. You may have seen this referred to as Real Time Information or RTI.

What will I have to do?

HMRC now requires you to send in PAYE information about every payment you make to employees at the time you make it. PAYE information relating to Universal Credit claimants is sent by HMRC in real time to DWP. For example, a payment you make today at 9.00am could be taken into account in a Universal Credit assessment at the end of the day.

It is important that you report your employees’ PAYE information on time; that is on or before the time you pay them, so that we can make the correct Universal Credit payments

Claimants will have to contact DWP for any queries they have about their Universal Credit payment. You can find more information about how to report PAYE in real time, along with how to get the right software to do it, from the HMRC website.

What will employees claiming Universal Credit have to do?

With Universal Credit, claimants will be set achievable work goals based on their personal circumstances. These will be recorded in a Claimant Commitment, which is a record of the responsibilities they have accepted in return for receiving Universal Credit and the consequences of not meeting them. Their Universal Credit payments may be cut if they do not meet their responsibilities.

They may have regular meetings with a work coach, who will focus on mentoring and coaching them to help them meet the requirements recorded in their Claimant Commitment. They will support and challenge them to fulfil their potential and help them to raise their expectations of what they can achieve. The goal is to help claimants to prepare for work and, once in work, to become financially independent over time.

We are working with employers and employer organisations to understand the most effective methods to support people to stay and progress in work. We have started to test and pilot new approaches to determine the best way to do this before we introduce it nationally.

When will the Universal Credit changes happen?

Universal Credit is being introduced in stages. It is available to single people, couples and families in some areas of the country.

It is being rolled out to all jobcentres and local authorities across the country from February 2015. The national expansion will only apply to new claims from single jobseekers.

The details of the local authorities and jobcentres that will begin delivering Universal Credit over the coming months can be found at GOV.UK

More information on how Universal Credit can help employers is available:

Universal Credit in the hospitality industry

An employer's view of Universal Credit

How Universal Credit can help your business

Universal Credit and employers: frequently asked questions

For more information visit www.gov.uk/universalcredit or the Universal Credit toolkit.


 

 

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BIG changes to PAYE - Real Time Information

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