By Denise Love, Payroll Bureau Manager at Menzies LLP

HMRC is currently running a pilot scheme to test the new electronic PAYE system that the government is introducing on 6 April 2013, this will be mandatory for all employers by October 2013.

The introduction of RTI represents the biggest change to payroll systems since the introduction of PAYE in 1944, and will have the positive effect of making the tax employees pay more accurate.

However, it has been reported that more than four of five small businesses are not ready for RTI. It is extremely important that employers are prepared for the changes, as failure to submit the required information to HMRC will have immediate consequences for employers, the most significant being the introduction of a penalty regime for late or inaccurate filing.

As part of the new process, every employer has been “invited” by HMRC to join RTI. However, employers should not be mistaken to think this is an invite they can politely decline. HMRC are prepared to allow certain, if limited, easements for the tax year 2013/14.

However, any inaccurate submissions may well attract a penalty based upon the potential lost revenue incurred. Employers will have to complete a Payroll Alignment submission providing all their employees’ mandatory details to ensure that both the employer and HMRC hold consistent and accurate employee data before RTI starts.

Given the general move towards electronic submission of payroll data, for many employers, the move to RTI will not be a massive burden. However, it will have an impact on all employers and pension providers, regardless of number of people employed or salary level.

The mandatory data required under RTI must include the employee’s full name, their date of birth, National Insurance number and gender. The submission must include student or temporary workers. Where previously there had been some exceptions, all employees will now have to be treated in the same way when starting work.

Although this may appear cumbersome, RTI is designed to benefit employers. It will:

- Make the PAYE process simpler;
- Make PAYE more accurate by reducing over and underpayments of tax;
- Reduce tax credit errors and fraud;
- Allow employees to receive information more quickly;
- Support the introduction of Universal Credits for jobseekers and people on a low income.

Companies should act now to ensure they are prepared to reap full benefit from the changes.

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