On 6th April 2013, HMRC introduced a new rule ordering almost all UK businesses to submit Pay As You Earn (PAYE) information in real time. The implications of the new scheme meant that companies that employ staff had to submit PAYE information at the time employees are paid, either weekly or monthly, rather than at the end of the year. The scheme, known as real time information, or RTI, came into effect at the beginning of the tax year, but due to complications HMRC has agreed to an extension in order to allow businesses to adapt to the new system.
According to HMRC, around 83 per cent if small businesses that employ fewer than 50 employees are using the new scheme together with a further 1m micro companies. The new system dictates that PAYE data is transferred electronically on the date employees are paid. In the first month, HMRC reported 44.5m payments went through without a hitch.
However, not all businesses have been able to implement electronic systems to transfer the data and have been given an extension until April 2014 rather than the initial end date of 31st October 2013. Colin Ben-Nathan, chairman of the Chartered Institute of Taxation (CIOT) called the extension “sensible” and said the sub-committee will work closely with the tax agency to help small businesses avoid unnecessary costs.
How to report RTI PAYE
In order to use the RTI system, small businesses are required to register for PAYE Online on the official HMRC website in order to get a user ID and password. The online service is to be used for sending the necessary forms to the tax man. However, small businesses also need to install or update payroll software in which they have to put their PAYE login details.
Although HMRC’s Director General for Personal Tax, Ruth Owen, described the roll-out of RTI as “exceeding expectations,” she announced that HMRC would now be writing to the minority of employers who are not using RTI. The reason for this she explained is “to establish how we can help them meet the requirements of reporting in real time.”
RTI will also monitor universal credit
HMRC has also claimed the data recovered from the RTI PAYE system will also help the Department for Work and Pensions monitor payments to low-level income families and individuals. The scheme which was also introduces at the beginning of the 2013 tax year will replace income-based Jobseekers Allowance, income-related Employment and Support Allowance, Income Support, Child Tax Credits and Housing benefit.
Universal Credit will be available to low income earners and unemployed individuals looking for work. The scheme is intended to give individuals more incentive to work and will still be paid even if they increase part-time hours.
If you have any questions or need assistance setting up your electronic accounts for the PAYE real time information system contact Taxaccolega, a low fixed fee accountant in London, on 08000 235 234 and speak to a member of our friendly team who will be pleased to help you.