By Daniel Hunter
UK employees are overwhelmingly in favour of the introduction of Real-Time Information (RTI) this week, despite many employers still being unprepared.
Almost two thirds of respondents (62%) support the change to more regular PAYE reporting even if it means additional work for businesses, new research from leading business software and services provider Sage has revealed today.
The findings from Sage’s Taxing Times study highlight the frustration and uncertainty felt by many people in the UK about miscalculated Income Tax, with three quarters (75%) of the 2,049 respondents stating that they believe it is unacceptable for HMRC to ever make mistakes with people’s Income Tax calculations.
Despite this, 71% of all respondents have either received a tax rebate or been asked to pay back additional tax to HMRC during the last ten years. Worryingly, more than 1 in 10 people (12%) polled by YouGov either didn’t know whether they were paying the correct amount of Income Tax or believed that they were currently paying the wrong amount of tax.
During the last financial year HMRC took the wrong amount of tax from one in six people, with 1.6 million having underpaid tax and 3.5 million having overpaid. However, the introduction of RTI, the biggest change to the PAYE system in seventy years, should ensure that tax discrepancies are a thing of the past.
Coming into effect from April 6th 2013, RTI requires firms with 50 employees or more to start providing employee PAYE, National Insurance and Student Loan information to HMRC every time they pay an employee, rather than just at year end. In a concession from the tax office, businesses with fewer than 50 staff are allowed to report monthly until October.
As a result of reporting to HMRC on a more regular basis, tax records will be more accurate and errors in the system should — in theory — become a thing of the past. RTI represents one of the most fundamental changes to payroll reporting requirements in the past seven decades, and will affect the 1.4 million UK businesses that have more than one employee on the payroll.
“The old adage that ‘the only certainties in life are death and taxes’ can be heard echoing around offices during payroll year end season, but given the scale of miscalculations in recent years perhaps it should be changed to ‘death and the need to double check taxes’,” commented Lee Perkins, Managing Director of Sage’s Small Business Division.
“On the face of it, RTI might seem like just another layer of bureaucracy for employers, but it’s clear that employees are looking forward to its introduction. With the right preparation and payroll software in place, submitting information to HMRC on a more regular basis will be a quick and straightforward process.”
Having helped more than 22,000 firms make over half a million RTI submissions to HMRC, Sage has developed five top tips to help employers still needing to adapt their processes for the change:
1. Act now and get all your employees to check the data you have for them is correct. Ensure all the information you have is up to date and that the correct names, date of birth and National Insurance numbers for all of your staff is recorded.
2. Educate your employees about how important the information they provide the employer is in ensuring the accuracy of the payroll, so they understand the implications for the business and for themselves.
3. Store all your business information securely so that you can react quickly to any requests, demands or legislative issues that arise.
4. Refresh processes so that you obtain data for all new starters. Unlike the past, under RTI it will be unacceptable to not have the full information for new starters. Make sure you have all the necessary information - full name, DOB and NI number - before a new starter begins their employment.
5. Make sure you are compliant. If you outsource to an accountant or payroll bureau, don’t be afraid to ask them how they are going to help ensure that your business will be RTI compliant.
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