Just 18 days before the most significant changes ever made to the PAYE system go live, HMRC has given in to pressure and given smaller employers (those with 50 employees or less) a further six months before they have to fully comply with the forthcoming Real Time Information (RTI) changes.
Real Time Information – the basics
Rather than submitting payroll data (including salary details and deductions for income tax and NICs) once a year; from April 6th, all employers will be obliged to submit payroll data each time they make a salary payment. The RTI implementation is also fundamental to the introduction of ‘universal credits’, which are also due to be introduced later in the year.
Unless you run your own payroll, most contractors and consultants will not notice any changes, as the onus is on accountancy and umbrella firms to comply with the RTI rules.
If you do operate your own payroll independently of your accountant, you should ensure that your accounting software has been upgraded to comply with RTI, and that you are able to submit RTI information to HMRC (you will need to register for PAYE Online).
If you are a limited company director, remember that you are ultimately responsible for ensuring that your payroll data is submitted to HMRC on time, and accurately, so if your accountant hasn’t updated you on how they plan to comply with the RTI regulations, you should get in touch right away.
You can find out more about RTI on the HMRC site here.
Last-minute concession for small employers
The requirement for all firms to inform HMRC each time they run a payroll from April 2013 has been relaxed to allow smaller companies to submit payroll data just once each month. Many employees are paid weekly, so this concession will ease the burden on many small firms (albeit for just six months).
Although most contractors and freelancers will not be directly affected by this change, as the majority pay themselves on a monthly or quarterly cycle, some experts believe this u-turn is just the first of many, as a result of HMRC trying to implement a system without providing employers with enough time to familiarise themselves with the changes, nor allowing enough time to test the ‘live’ RTI system.
George Bull from Baker Tilly, in his latest email bulletin, said that “questions surely have to be asked about the rushed introduction and the lateness of changes”, and predicted that further announcements are bound to be made before, or just after the RTI system is implemented on April 6th:
“Large employers will generally cope, but the needs of small business have only been recognised belatedly, and there must be more relaxations on the way.”
John Walker, Chairman of the FSB said: “We hope that HMRC make this regular reporting a permanent measure to help the smallest firms they review the system in the summer. ”
Given that there are less than three weeks left to go before RTI goes live, and the apparent lack of preparation involved in both informing companies of their obligations, and getting ready for live implementation, today’s announcement could be just the first of many over the coming months.