How much do you know about RTI?

You might be aware of changes that are being introduced regarding HMRC. In fact, even though the new system won’t be implemented until April 2013, some organisations are already involved in pilot schemes. But, if you aren’t familiar with the changes, you’re not alone. And it’s not too late to get to grips with it to ensure that your business is prepared.

So, next year, the introduction of Real-Time Information (RTI) will mean that employers tell HMRC about the tax, National Insurance contributions (NICs) and any other deductions when or before payment is made to employees, rather than waiting until the end of the tax year. This will mean that an electronic PAYE return must be filed every time employees are paid, but it won’t affect self-employed workers, such as contractors.

The idea behind this is to improve the way the PAYE system operates and make it more accurate for both employees and employers. Although potentially daunting, the whole process will become less of a burden. It removes the need for the end of year return (forms P35 and P14) and will also simplify the employee starting and leaving process.

And there are other benefits. PAYE will become more accurate for individuals, there will be a reduction in the number of bills and repayments sent after the end of the tax year, it will be easier for HMRC to pursue late payments effectively, and we’ll see a reduction in Tax Credits errors and fraud.

However, as with any new legislation, we can’t pretend that it’s going to be easy for business owners to adapt to the changes. Payroll can be a complex process and RTI will undoubtedly add to its challenges. At first, it’s likely to bring in extra admin work, and it will take some time to get used to, particularly for smaller organisations.

Other potential issues for you to be aware of are possible cashflow problems if immediate payment is needed, particularly if there is a ‘pay when paid’ contract. There’s also the worry of facing financial penalties and inspections if it isn’t implemented correctly, which puts greater pressure on businesses.

Over time though, RTI reporting will become an integral part of an employer’s normal payroll activity – it will just take some getting used to. And, if you start preparing sooner rather than later, it won’t be as much as a shock for you. You should start by looking closely at your payroll processes and systems. Are they able to cope with RTI?

If you currently process payroll in-house, your software will probably need to be upgraded to meet the new requirements, but speak to your software providers about this for some advice. It may also be worth you considering outsourcing, which would take the pressure off of you.

Unfortunately, changes such as this can’t be avoided, but if you start thinking about it now, you’ve got time to weigh up the options – don’t leave it until it’s too late. Over time you’ll see the benefits, but it just takes a little bit of adjustment and planning. And remember that you’re not on your own. You may be a boutique recruiter, but by being part of TEAM you have that support network, so make sure to share any concerns with fellow members. Chances are, they’ll be feeling the same as you!

Liz Longman
www.jobsatteam.com

TEAM - The Employment Agents Movement UK Limited

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