1 Feb 13
Real Time Information – What you need to knowfor changes to payroll processing
Real Time Information (RTI) is almost here. The way your payroll is processed is changing and the time to start planning for it is now, if you haven’t done so already. This is because all responsibility for submission of data rests with you as the directors of the organisation. Wellers have put together this Question & Answer guide to provide you with the essential information and steps you need to take to ensure you are compliant with the new payroll system. Please read it carefully and if you have any questions or require further information, then do contact us for advice on the details provided at the end of the document. To download this information as a PDF for printing, click on this link. The guide covers the following topics, simply click on the question to view the answer, or, scroll down the page.
1. What is RTI?
2. Why are the government doing this?
3. What information needs to be submitted to HM Revenue & Customs?
4. How does my organisation best prepare for RTI?
5. Can Wellers recommend an RTI compliant payroll system?
6. What are the responsibilities of the employer?
7. Why the emphasis on accuracy of data?
8. What will the fines entail?
9. Are there any additional requirements and what is employer alignment?
10. Which submissions are being done away with?
11. What new information about employees is required from the payroll?
12. What if my organisation is not ready by April 2013?
13. What is an employee can’t provide their national insurance number?
1. What is RTI?
RTI is a priority Government programme aimed at improving the operation of the Pay as You Earn (PAYE) payroll. The changes to this system mean that information will be sent to HM Revenue & Customs (HMRC) in ‘real time’ (instantaneously) as employees are paid on pay day instead of sending information (forms P35 or P14s) once at the end of the payroll year. This marks a significant shift for payroll departments across the UK which have operated in largely the same way since the inception of PAYE in 1944. From April 2013 employers and pension providers will be legally required to operate PAYE through RTI.
2. Why are the government doing this?
The system is being introduced to support the new Universal Credit (a new welfare benefit system) where all state benefits are being combined into a single payment. HMRC hope to save at least £7.5 billion a year from this revised system through reductions in the incidence of errors and benefit fraud. This should then lead to improved tax collection and more accurate spending on benefits.
3. What information needs to be submitted to HMRC?
Data that needs to be submitted when an employee is paid includes:
- Employee name
- Date of birth
- National insurance number
- Employee address details
This information will be required for submission for all employees including temporary and casual workers and employees paid below the national insurance lower earnings limit. Please also see question 9.
4. How does my organisation best prepare for RTI?
The first step should be to check that all employee records held on your payroll are both complete and accurate. Most organisations will rely on their employees to obtain this information so it is vital to educate them about this and why they must provide full and accurate information.
All information should then be verified before submission using the following sources:
- Passport document
- Driving licence
- Birth certificate
- HMRC documentation
- Department for Work and Pensions records
In terms of the payroll system, if you outsource it to a third party or your accountant then you need to ensure that their processes are satisfactory from April 2013. If you have your own accounting software then you need to provide training for all payroll staff. It is expected that by April all major software payroll providers will be compliant.
5. Can Wellers recommend an RTI compliant payroll system?
We can offer clients an online HR and payroll system called Portico which contains all the necessary fields to capture the data you need to submit for RTI. Of note, this system was part of the RTI pilot that was rolled out in October 2012.
Please be aware that the RTI demands for compatibility and consistency of employee data plus the increased filing demands will increase our workloads to prepare for RTI and run your payrolls. If you would like to trial a demo of the Portico system then do contact us on the details provided at the end of this document.
6. What are the responsibilities of the employer?
The responsibility lies with the employer to not only submit this information but also to ensure the accuracy of all employee data that is sent to HMRC. In the case of late filing or where inaccuracies and anomalies are found, fines will be applied.
7. Why the emphasis on accuracy of data?
HMRC claim that over 80% of their data quality problems are because of incorrect information supplied by employers. An example of this includes the case of over 2,000 employees on their records having the exact same National Insurance number. This is just one example of many instances of data issues.
8. What will the fines entail?
Details of fines are still being drawn up and it should be noted that directors are personally responsible for ensuring payroll processes are fit for purpose. Further information will be communicated when the fines are finalised, be sure to visit www.wellersaccountants.co.uk to stay up to date on this matter.
9. Are there any additional requirements and what is employer alignment?
There are additional submissions that employers will be required to make. However, please note that not all the submissions will be necessary for all employers.
a) Employer Alignment Submission (EAS)
Before you can report using RTI all PAYE Schemes must undergo something called employer alignment. Employers will receive details from HMRC about the date they need to submit either an Employer Alignment Submission (EAS) or their first Full Payment Submission (FPS, see ‘b’). You will submit an EAS if:
- You have a large PAYE scheme with over 250 employees
OR
- Your PAYE scheme is ‘split’ because you have different payroll providers, two or more payroll systems for example monthly and weekly, or you can’t make a single FPS submission because of bandwidth restrictions
For the first FPS, employers should include all employees who have been employed during the current tax year, including starters and leavers, or those that have not yet received a payment in the relevant period.
If you prefer, you can submit an FPS for each ‘part’ of your payroll, for example one first FPS for weekly pay; one for monthly and a separate FPS for leavers. The first FPS should also include the hours normally worked, that is, the number of hours a person is expected or regularly works in a week.
The second and subsequent FPSs will only contain pay and deduction details for those employees paid on that payday. You don’t need to include employees that are not being paid. The hours worked needs to be included for the purposes of calculating Tax Credit payments. For further details on Employer Alignment go to:
www.hmrc.gov.uk/softwaredevelopers/rti/payroll-alignment.pdf
You will submit your employee details for payroll alignment when you send your first FPS, although you can submit a separate EAS if you wish.
b) Full Payment Submission (FPS)
Using RTI employers and pension providers will send HMRC an FPS detailing tax, NICs and other deductions on or before the payroll is paid.
c) Employer Payment Summary (EPS)
An Employer Payment Summary (EPS) can be sent if:
- no payments are made to any employees in a tax month
- or you want to recover statutory payments, NICs compensation on statutory payments, Construction Industry Scheme (CIS) deductions suffered (limited companies only) or an amount under the Regional National Insurance Contributions Holiday for New Businesses (NICs Holiday)
If you want the deduction to apply to a specific tax month, you’ll need to send the EPS by the 19th of the following tax month. For example, if you wish to inform HMRC that you are recovering some money for the June tax month (06 June to 05 July), the EPS showing these details must be received by HMRC before 19 July. If HMRC does not receive the EPS until 20 July it will apply the reduction to the July tax month.
Once you’ve sent an EPS to HMRC, they can then offset the amounts you want to recover against the payments you’re due to make. If no payments are made within a pay period, an EPS should be submitted to indicate ‘No payment due as no employees or subcontractors paid in this pay period’.
d) NINO Verification Request (NVR)
The NVR will enable you as an employer to:
- confirm that the National Insurance number the new employee has given you is correct if it matches to personal data provided by the employee
- trace a National Insurance number where the new employee provides personal identity details including full name, address, date of birth and gender
e) Earlier Year Update (EYU)
You can use an Earlier Year Update (EYU) to correct data for 2012-13 and later tax years. This can be used only for the years where RTI was applicable.
10. Which submissions are being done away with?
The following submissions will be scrapped with RTI:
- end of year returns – P14, P35 and P38A
- new employeeinformation – P45 Part 3, P46, P46 (Pen) or P46 (Expat)
- leaver information – P45 Part 1
11. What new information about employees is required from the payroll?
There will be a new mandatory field for all employees called Employment Type. This determines the type of employment held by the employee and will be classified as follows:
‘N’ stands for Normal and will be the default value.
‘P’ is entered where the employee is a pensioner.
‘X’ is used where the employee is an Ex Pat.
Additional information will then need to be entered to that of a normal new starter. This will include that the employee is:
- Living in the UK for 6 months or more
- Living in the UK for 6 months or less
- Working both in and out of the UK but living abroad
When payroll is processed for the new tax year, a default value will be entered for contractual hours. It is important you select the option that is most applicable from:
- Up to 15.99 hours per week
- 16 to 29.99 hours per week
- 30+ hours per week
- Other
There is a foreign country field for employees that don’t work in the UK and this is entered as an alternative to the UK postcode when providing new starter details.
If you employ an ex pat, then there is an additional optional field for passport number. While not mandatory, it is recommended you supply this for payroll input.
12. What if my organisation is not ready by April 2013?
Compliance with RTI may officially begin in April 2013 however, this is actually the beginning of a migration period and employers will have until October 2013 to be fully up and running with the new payroll system. After that date it will be mandatory for all employers to fully comply and HMRC will be notifying employers up to 6 weeks before mandatory RTI submissions.
13. What if an employee can’t provide their national insurance number?
If an employee can’t submit their national insurance number then either download the Form CA5403 from the HMRC website or contact the registration line on 0845 915 7006. In the instance where an employee has never been issued with a national insurance number, then contact Jobcentre Plus on 0845 600 0643.
Neil Beck
T: 020 7630 6665 or 01865 723131
E: neil.beck@wellersaccountants.co.uk
About Wellers
Wellers Accountants is one of the most successful medium size accountants in the South East. Established 70 years ago, Wellers has four offices covering London and the Thames Valley with around 80 loyal and experienced employees. The firm provides a comprehensive range of accountancy services whilst retaining a partner-led approach. Partners work integrally with organisations and their owners to achieve their business objectives. Clients benefit from tangible savings and sustainable business growth, branded by Wellers as ‘Business Oxygen’.
www.wellersaccountants.co.uk
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roven entrepreneur with an impressive track record in establishing and developing businesses that generate strong profits and growth. Mark became a business coach/mentor in 2008. 
roven entrepreneur with an impressive track record in establishing and developing businesses that generate strong profits and growth. Mark became a business coach/mentor in 2008. 
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