Consultation on PAYE Real Time Information proposalsFriday, December 10th, 2010
HMRC received nearly 400 responses to the discussion document Improving the Operation of Pay As You Earn (PAYE) that was published last July. Nearly three-quarters of respondents who expressed a view were in favour of the Real Time Information (RTI) proposal and the Government has taken the decision to introduce it in stages from 2012. Although around a fifth of those who expressed a view could see some merit in the Centralised Deductions (CD) proposal, the majority of respondents expressed significant concerns about it.
The second stage of consultation has now begun with the publication on 3 December of a consultation document entitled Improving the operation of Pay As You Earn (PAYE): Collecting Real Time Information. The document does not seek any views on the CD proposals. The consultation period runs until 28 February 2011.
RTI is critical to the introduction by the Department of Work and Pensions (DWP) of Universal Credits from 2013 and will be used to award and adjust Universal Credit to take account of employment and pension income. To support DWP’s plans, RTI will be introduced from Spring 2012, with the migration complete by October 2012.
Benefits in kind are not included in the proposals, presumably in view of the implementation timetable. Employers will still be required to submit forms P9D, P11D and P11D(b) at the end of each tax year. The consultation seeks views on how expenses and benefits reporting should operate alongside RTI. Employers with local tax office agreements for payrolling benefits will be able to submit the details under RTI.
Although the decision to introduce RTI has been made, the consultation provides the opportunity to influence:
- the data items to be submitted with the payment
- the process of transition to the new system
- the identity management process
- whether or not there is a need to relax the requirement in the case of certain small employers, and
- who these employers might be.
The following is a summary of how RTI will work but we recommend that everyone working in payroll read the full consultation document.
Changes resulting from RTI
The basic RTI process will be as follows:
- Instead of sending information at year-end, changes to PAYE regulations will require employers to provide payments and deductions information when they do their regular pay run for their employees, whether that is weekly, fortnightly, monthly, etc. Payment information covers all employees, including P38(S) students and all earning below the LEL. Details of employees joining and leaving would also be sent, and a NINO checking facility is planned. The (up to) 73 specific data items that will be sent are listed and are limited to those required for statutory purposes.
- Employers will also provide details about secondary NICs and adjustments (e.g. for statutory payments, CIS payments) at the time they pay over to HMRC the tax, NICs and Student Loan repayments deducted. The current payment deadlines are not expected to change. The (up to) 29 additional data items that will be reported are also listed.
- The consultation seeks views on whether quarterly payment should be discontinued and whether employers should be required to pay HMRC electronically, as is already required for corporation tax and VAT. Other possible payment options are being considered, including collection in full or in part by HMRC using direct debit.
- Most employers will be required to use the Bacs system to transmit RTI information with payment instructions. One of the consequences of this decision is that Electronic Data Interchange (EDI) will be discontinued for PAYE.
- A common standard will be used for the transmission of RTI data at all stages of the payments infrastructure from payroll software, through banking interfaces and Bacs submission software to the Bacs system itself. HMRC will bear the costs of extracting the RTI information from Bacs.
- Employers with fewer than 50 employees who do not pay their employees via Bacs will initially be able to submit RTI from their software, or via an agent, using an internet channel through the Government Gateway.
- RTI will mean that the following procedures will be simplified or discontinued:
- issuing a P45 to all employees who leave employment
- notifying HMRC of those employees who join
- determining a tax code by requiring new employees to complete a P45
- submitting end of year P14, P35 and P38A returns to HMRC.
- Employers will still issue payslips and year-end P60s. In addition, a pay/tax statement will be issued to leavers.
Timetable for implementation
The proposed timetable is:
- April 2012 to October 2012: Test system with a small number of volunteer PAYE schemes (large, medium and small employers)
- October 2012 to January 2013: Adjust the system to reflect lessons from the testing to migrate a further group of volunteers
- From January 2013: Mandate large employers to start using RTI
- From April 2013: Mandate medium-sized employers to start using RTI
- From August 2013: Mandate small employers to start using RTI
- October 2013: Migration complete.