Real Time Information: Is it Working?
This April saw the introduction of the biggest overhaul to the Pay As You Earn (PAYE) system of income tax since its introduction nearly 70 years ago. In simple terms, employers are no longer able to wait until the end of the year before telling the taxman how much they have paid their staff, but must do so whenever a payment is made.
The Real Time Information (RTI) reform is designed to eliminate tax code errors and support the introduction of the new Universal Credit by linking up the tax and benefit systems. HMRC have claimed that RTI will reduce administrative burdens on business by about £300 million a year.
It has been two months since the roll out of RTI so, the question is, is it working? Concerns about the impact on business and HMRC’s capabilities were rife amongst business groups and there was further pessimism around HMRC’s own online technology remaining accessible at peak times. However, early indications suggest the transition has been much smoother than earlier feared. More than 1.4 million employer PAYE schemes are now reporting to HMRC in real time and information about 44.5 million payments made to employees between 6 April and 5 May was successfully reported online to HMRC.
Commendably, HMRC has recently announced that it is seeking to extend the temporary relaxation of the new reporting rules for businesses with fewer than 50 employees from October 2013 until April 2014 which means businesses will not be required to change their approach halfway through the tax year. The relaxation has meant businesses are able to report through the new system once a month rather than each time they pay their employees. This gives small businesses that pay weekly, but only run their payroll at the end of the month, some extra time to adjust to the new requirements.
Inevitably, with a measure of this magnitude there have been teething problems. Users report that the new system has classified tens of thousands of workers as no longer in employment, disregarding their taxable benefits, including child care vouchers and private health insurance meaning they have been “under taxed”. On a personal level, it has been a positive experience for WSM as the administrative burden has been negated by having up to date information at all times.
Come April 2014, all employers will need to be reporting in real time so ensure you are operating RTI correctly in this transitional period to avoid a penalty landing in your letter box!
Our highly skilled and competent payroll department are here to help so if you would like further information or any assistance with these matters, please give us a call on 020 8545 7600 or email Chirag.Shah@wsm.co.uk.