Are You Prepared for the Changes to PAYE?
The way in which PAYE is reported to HM Revenue and Customs (HMRC) is changing. As of the 6 April 2013 all payments made to employees must be reported as they are made. HMRC are calling this new reporting process Real Time Information (RTI). RTI is mandatory and will affect everyone that pays employees under the PAYE scheme.
The way in which you calculate tax and NIC’s is unchanged, and although there is an additional step to your payroll routine, it does remove forms and procedures from other places. The overall effect however is you save time and the government saves money.
How does it affect my business?
The figures must be submitted before, or on the day that payment is made. HMRC has created a new form, Full Payment Submission (FPS) especially for this purpose. Payroll software will generate all of the correct forms to allow you to perform the online submissions and include:
• The amount of all payments
• All deductions made
• Changes such as new starters and leavers
Therefore your business must now incorporate the submission of these reports into the normal payroll processes.
Where are the benefits?
There is no longer the requirement to submit forms P35 and P14 as part of the year-end process. HMRC has also taken this opportunity to streamline the processes for new starters and for leavers. You no longer need to submit form P46 or any of the P45 to HMRC, instead they will be informed of these changes using FPS. You will still be required to provide a leaver with their copy of the P45, and as with the payments, these changes must all be reported immediately.
Other less common forms that will no longer be needed are CA6855 and P38(S).
Getting PAYE details ready.
It is important that the details you hold on your payroll system for each employee is accurate and up to date. Failure to do this will lead to you receiving lots of queries from HMRC regarding your employees. Inaccuracies in the following could create queries: full name, home address, NI number, date of birth and gender.
Does this affect anything else to do with tax or PAYE?
The way in which you calculate the PAYE will remain unchanged, as will coding notices, P60’s, payment due dates, P11D and P9D, the new RTI does not affect the Construction Industry Scheme (CIS) either.
What about my employees?
There should be no change from the employee´s point of view, apart from having to keep their details as up to date as possible. They will be paid in the same way and it will still be their responsibility to inform HMRC of any changes to their personal circumstances.
Is it better?
As with most new things, only time will tell. It does appear to mean that the government will always have more up to date information, whilst getting rid of some of the awkward forms businesses currently have to submit. Whether the new addition to the payroll process outweighs these savings will depend on each businesses circumstances.
Self-employment tax advice
If you would like further information about the changes to PAYE records or any other tax advice call Taxaccolega, a low fixed fee accountant, today on 08000 235 234 or email email@example.com. Likewise, if you are just starting out or thinking of becoming self-employed we can give you professional advice with regards business models that are proven to be successful.
Click on the link to watch video : Get Ready to Operate PAYE in Real Time (watch video)