By Daniel Hunter

86 percent of businesses have started to plan for implementing Real Time Information (RTI) reporting of payroll data to HMRC when it becomes mandatory in April 2013, according to a survey of 42 large businesses by KPMG in the UK.

This is a significant increase from a similar survey conducted by KPMG in March this year in which two thirds of employers had yet to begin to prepare.

But despite almost nine out of ten respondents saying that they had commenced planning, only a fifth (21 percent) had conducted a payroll data cleanse, a process which, according to KPMG, is one of the first and most basic actions to take when preparing for RTI.

Nearly two thirds (65 percent) said that they had not considered the cost of RTI to their business (another crucial element of the planning process) and less than half (44 percent) said they were confident that their current payroll could cope with RTI’s requirements.

“It’s very good news that so many businesses are starting to plan for RTI but our data suggests that they really are at the very beginning of that process and they quickly need to translate thoughts into actions if they are to be ready in time," Steve Wade, director at KPMG, commented.

HMRC have recommended that businesses take the following actions to prepare for RTI:

- Carry out data cleanse
- Talk to your software payroll provider
- Review recruiting and payroll process for new employees
- Talk to relevant stakeholders

“With RTI becoming mandatory from next April, employers really do need to start implementation," Wade added.

"If their employee data is up to date, they don’t operate multiple payrolls, have a low turnover of staff and their payroll provider is ready, the transition may be very smooth. But if this is not the case, they may well need to do some housekeeping before next April to reduce the chance of HMRC rejecting their data submissions and possibly imposing penalties.”

Common areas to address

Poor employee data: “garbage in: garbage out”

In KPMG’s experience, the most common issue for businesses is poor employee data. This is why the data cleanse is the first step in the planning process. Errors frequently found are incorrect dates of birth, wrong names and inaccurate address data.

It is important that employers have accurate employee data as HMRC may well reject an entire submission on the basis of a single error.

“The old adage ‘garbage in: garbage out’ certainly holds true for RTI. Under the current PAYE regime, it’s not that much of an issue if a date of birth is wrong or an employee’s name is misspelled," Matthew Hunnybun Partner KPMG commented.

"Under RTI however, such errors can have serious consequences if HMRC is not able to match the data the employer submits with the information it holds for the employees because this can lead to penalties being charged.”

Payroll issues

Beyond the employee data, the next most common issues tend to be around the payrolls themselves. Usually these fall into two categories: issues relating to the employers’ side of the payroll (such as running multiple payrolls which could be consolidated into simpler ones) or they are on the payroll suppliers’ side where in general they relate to the suppliers’ ability to cope with RTI requirements.

“Important questions an employer should ask themselves are," according to Hunnybun, "Do I currently obtain and submit all the information required by HMRC about a new employee to HMRC before I make the first payment to the employee?

"Could I submit my year end summary (form P35) on 5 April?

"Is my payroll always correct by the payroll cut off date? i.e. no adjustments no advances etc.

“If the answer is no to any of these questions then the employer will have difficulties with RTI.”

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