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RTI – Summary
Saturday, November 26th, 2011
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Over the last few weeks, we have taken a journey right back to the time before RTI even had its name. Just before we are brought totally up-to-date, it is worth pausing, reflecting and summarising. The exchange of data in real time is such a change for us and, as such, it is so important that we fully understand it. To take RTI forward, it is essential to know where we have been, therefore, we make no apology for this summary.
We always anticipated that a new Government would review PAYE. George Osborne had indicated as much in the run up to the Election. And, in fairness, a review was due. PAYE was a great mechanism but was, largely, the same as when it was introduced in 1944. The world had changed and employment had changed, however, PAYE had stayed the same.
Therefore, the Summer 2010 discussion document ‘Improving the Operation of PAYE’ came as no real surprise. It introduced us to the idea of exchanging data with HMRC in real time rather than once a year. It also caused us much alarm at the prospect of HMRC taking over the majority of the payroll function in a concept they called Centralised Deductions.
In November 2010, just after the discussion document closed for comment, the DWP published their White Paper ‘Universal Credits – Welfare that Works’. It was at this time we realised that the Government’s welfare reforms were dependent on the exchange of data via RTI. As soon as this White paper was published, we knew that RTI was a foregone conclusion. All that remained was when and how, although the ‘when’ was less of a query given that Universal Credits were to be live in October 2013. 02 December saw the Government confirm that RTI would be going ahead in their Impact Assessment, but made no mention of Centralised Deductions.
The next major event was the publication of HMRC’s consultation document ‘Improving the Operation of PAYE: Collecting Real Time Information’ on 03 December. This did make mention of Centralised Deductions, but only to advise that Government had put them on the back burner. The focus was on how RTI would work in practice and made no secret of the dependent link with DWP’s welfare reforms. As to how RTI would work in practice, this was relatively simple on the surface – when the payment is made to the employee, a file of personal and payroll data is transmitted to HMRC. The starter, leaver and end of year processes would be replaced by RTI, meaning an end to the submission of P45, P46, P14 and P35 information. The transmission would be via the BACS channel, though an alternative would be made available for employers who do not pay electronically. Testing will start in April 2012 with pilot employers and a phased go-live up to August 2013. The consultation closed in February 2011.
Spring 2011 saw HMRC announce that RTI reporting would not be through the BACS channel, as they had indicated in all literature up to that point. Instead, two routes would be available – EDI and the Government Gateway. They issued Technical Packs for software developers for both routes, stressing that the BACS channel remained their long-term objective. HMRC embarked on a Summer of engaging the software developer and payroll professionals by holding a number of workshops and forums plus establishing The Customer User Group.
When the consultation ‘Summary of Responses’ document was eventually published in September 2011, this contained few surprises. There was confirmation that the responses to the document by the industry were, largely, in favour of RTI and not in favour of Centralised Deductions. There was also some relaxation / revision of their data requirements. Overwhelmingly, the document demonstrated concern at the tight timescales; though, given the unbreakable link with Universal Credits, there was little relaxation in this regard. A revised schedule was published, with the objective that 25% of employments will be RTI live by March 2013. September also saw HMRC embark on their pilot employer engagement with a series of presentation workshops.
On 14 November 2011, draft Regulations were published, outlining the employer’s obligations when RTI is effective for them. These are Regulations that are necessary for PAYE, NICs and CIS submissions under RTI, and will apply from 06 April 2012 to those employers making RTI submissions. Therefore, the Regulations will increasingly apply to employers as more and more begin to make submissions under real time exchange. These Regs also include the proposal to make redundant the Simplified PAYE Deduction Scheme (SPDS). HMRC are asking for comments on these draft Regulations by 09 January 2012.
As discussed above, on 23 November, HMRC announced they are extending their RTI pilot, with an additional 1,300 volunteer employers invited to join in July 2012 plus a further 250,000 in November 2012.
Further Information
- Payroll Help 28 October 2011 – RTI The Beginning
- Payroll Help 04 November 2011 – RTI – What HMRC Did Next
- Payroll Help 11 November 2011 – RTI – The First Consultation
- Payroll Help 18 November 2011 – RTI – The Consultation Response
- Payroll Help 23 November 2011 – RTI Needs You!
- Improving the Operation of Pay As You Earn (PAYE) – HMRC Impact Assessment
- Universal Credit – Welfare that Works
- Improving the Operation of Pay As You Earn (PAYE) – Collecting Real Time Information
- HMRC Press Statement 04 April 2011
- HMRC Statement 13 May 2011
- Summary of Responses 30 September 2011
- HMRC – Draft RTI Regulations (PAYE)
- HMRC – Draft RTI Regulations (NICs)
- HMRC – Draft RTI Regulations (CIS)
- HMRC – Draft PAYE Direction (Technical Note)
- NDS – HMRC Press Statement 23 November 2011
