If you operate a PAYE (Pay-as-you-earn) scheme via your limited company, you should be aware of upcoming changes to the way your communicate payroll data to HMRC from April 2013.
Real Time Information (RTI) changes will mean that payroll operators will have to inform HMRC about tax, NIC and pension deductions made from an employee’s pay before or when such payments are made, rather than informing the tax authorities at year-end.
The new systems is intended to make life easier for all parties. The implementation of the RTI changes will remove the need for companies to submit end-of-year tax returns for all employees (Forms P35 and P14), it should make PAYE calculations more accurate by enabling HMRC to correct mistakes rapidly rather than playing catch-up at the end of the tax year.
The new rules will start operating from April 2013 onwards, with all employers operating RTI by October 2013. Limited companies will need to ensure they are able to communicate payroll date in real-time by the implementation date, either by using the free HMRC Basic PAYE Tools package, or commercial accounting software.
If your business currently uses payroll software, you should prepare in advance to ensure that it is going to be compatible with RTI reporting.
Importantly, business owners should know that the changes only affect PAYE payments, and do not the self-employed (sole traders / partnerships). The PAYE system itself remains unchanged – only the way payroll data is reported is going to change.
You can read some very comprehensive FAQs about Real Time Information on the HMRC website here. Further advice and information is bound to become available as the RTI implementation date nears in 2013.