Posted by Sally Nichols on 05 Apr 2013

6th April 2013 sees the biggest shake-up of the Pay As You Earn (PAYE) system in nearly 70 years.  Employers will be required to move to a new way of reporting PAYE in real time, Real Time Information (RTI).  The new system requires businesses to report to HMRC every time they pay their employees, rather than annually.

According to HMRC, this change should create a PAYE system that is quicker, easier and more accurate and is being introduced to support the operation of Universal Credit.  It will also mean that HMRC are aware of exactly how much PAYE & NI an employer will be due to pay and there will be penalties due for late or underpayment.

In a recent relaxation of reporting arrangements for small businesses (those with fewer than 50 employees) HMRC have recognised that some small employers who pay employees weekly, or more frequently, but only process their payroll monthly may need longer to adapt to reporting PAYE information in real time, they have therefore agreed to relax reporting arrangements for small businesses until October 2013.

Until 5th October 2013 small employers who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5th).  HMRC will continue to work with employer representatives during the summer to assess and understand the impact of RTI on the smallest businesses and consider whether they can make improvements to real time reporting which will address their concerns without compromising the benefits of RTI or the success of the Department for Work & Pension’s Universal Credit.

Tax Innovations have been taking part in the pilot scheme since the end of June 2012.  We have been running monthly & fortnightly payrolls as part of the pilot and on the whole, our experiences have been positive.  We have however discovered that payrolls which are run with a pay date that falls around the tax month end, 5th, can run into problems with the timing issues.  This has resulted in calls from HMRC to say that PAYE has been underpaid, when in fact the payment is not due for another month.  It would appear that we are not alone in having this problem and HMRC are in discussion with various payroll bodies who are awaiting a definitive response from HMRC on this issue.

If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com