The new RTI regime is bearing down on us at high speed - but if our recent payroll courses are anything to go by, many firms are yet to finalise plans on this issue and do not seem to perceive a potential opportunity to generate new business.
RTI will be mandatory for all employers starting from April 2013 next year. Between April 2013 and October 2013 employers will be given their RTI compliance date and may only have a relatively short notice period to get up and running.
All employers will be using RTI by October 2013.
In principle, the RTI system means submitting payroll information, to HMRC, on or before the normal pay date.
There are three practical side-effects of the new RTI system - firstly employee information needs to be completely accurate, secondly the submission cannot be delayed and finally HMRC will know how much Tax and NI is due each pay period.
It is inevitable that there will be penalties for employers who fail to submit, or submit late returns as well as the existing penalty regime for late payments.
Many clients will view RTI as the 'final straw' - particularly those currently running a manual payroll, and will be looking at methods of outsourcing their payroll - so who will they turn to - will it be your firm or a competitor?
We are providing a series of articles on the practical implications of RTI, starting with 'Preparing the employee data for RTI' and this follows below. To help you keep your payroll clients informed of the position and any action required, we are also writing a client letter. More information about the letter will be available towards the end of May.
You can find out more on HMRC website including a summary of FAQs.
Preparing the employee data for RTI
The first phase of switching over to RTI is the so called 'Payroll Alignment'. This process checks employee detail against the information HMRC already has.
The very first submission to be made on the RTI date is a full set of payroll data for HMRC to validate.
Accuracy of data is essential so that data submitted under RTI correctly links up with databases stored by other government departments (DWP for example who hold pensions and NI records)
RTI relies on up to 120 or so key pieces of information marrying up with information stored in these other systems, but let's start with the 3 most fundamental -
EmployeeName (i.e. correct Gender, First name, middle name(s) and Surname)
Three traps to avoid in particular
- Don't use 'known' names e.g. Bill or Will instead of William, Sue instead of Susan, Bob instead of Robert
- Don't use initials in the forename or surname fields
- Don't split double-barrelled names over forename and surname fields -
If Jean-Paul is a double-barrelled forename for example, then this all goes in Forename field
If Smith-Jones is a double-barrelled surname for example, then this all goes in the Surname field
Employee Date of Birth
Employee address (if NINO is not known)
If you operate a payroll service for clients, you may need to provide an up to date list of employee information so that this can be checked by the employer.
The employer may need to ask employees for one or more of the following in order to check the key data:-
Current passport - to check name
Driving Licence - to check name and address
Birth certificate - to check date of birth
Other documentary evidence or deed poll - for change of surname and/or use of double-barrelled names
DWP/HMRC correspondence - to verify NINO
Verifying the employee data at this stage will avoid any last minute panic in the build-up to RTI compliance.
Our next article will cover the implications of running a payroll once under the RTI regime - giving you a chance to make any changes to existing procedures in advance of the RTI date.
Contributed by Mike Rees & Norman Allison