Did you know that you may be approaching the last frantic payroll year end to worry about getting the P35 to the Revenue by the 19 May?
No, your eyes are not playing tricks, but it may not be as good as it sounds!
The Revenue are introducing RTI a process where all payrolls will need to be performed on line. The process is aimed to reduce the number of errors made in employees’ tax codes and the number of Tax Credit frauds.
Currently the Revenue issue tax codes and pay Tax Credits based on historical information leading to incorrect deductions especially where people’s circumstances change. The Revenue may not be aware that an employee has another job or has pension income.
In one case a basic rate tax payer was getting 40% tax deducted from each of her 3 jobs and this took months to sort.
The idea of RTI is that with accurate data held on the Revenue’s computer, when employers log on to do the payroll the Revenue’s computer will check that employee’s data across the country and will advise the correct tax code to be applied automatically.
In fact it is one of the conditions of RTI that you cannot process your payroll before transmitting data to the Revenue’s computer. This will include the proposed gross pay of each of your employees.
The Revenue will know exactly how much each employee is earning from each employment and pension and will therefore theoretically be able to ensure that the correct amount of tax is being deducted overall, as well as checking income for Tax Credits, or Universal Credits as they will be known.
In addition to this on the employer’s first submission they will have to include the normal working hours of each employee. This is for the Revenue to look at Universal Credits entitlements but no doubt this will be used for other checks such as Minimum Wage.
Even where no payments have been made to individuals the process will need to be carried out.
The Revenue believe this process will reduce their costs and they will be able to focus on non-compliance issues, beware more PAYE visits and ensure your accountant’s fee protection scheme covers such visits.
So whilst a benefit for the Revenue there are several downsides for employers and also some practical issues in addition to the above, it appears that it may be the end of the straightforward sub to the employee prior to pay day as in the future such payments will be subject to an on line process before they can be made!
In order for the Revenue to match specific individuals the first Full Payment Submission will include details of all staff on the payroll for that year and this will be a data cleansing/checking process, ensuring that National Insurance numbers are correct and not AB123456C or NOTKNOWN! This will also include getting everyone’s middle names entered correctly as well as their correct first names – apparently the Revenue believe this is quite a big task in itself. This will also show how many employers are taking copies of the correct documentation when taking on staff, even casuals.
Penalties will be invoked for incorrect data as this will impede the ability to match individuals nationwide.
So when does it all start? The Revenue are picking the chosen few for a pilot scheme from April 2012 but hope that most employers will have joined by April 2013 when a mandatory migration begins. For those not joining the club at that stage they will have no option from October 2013. There may be as little as 4 weeks notice of mandatory migration so it will be good to get information cleansed as soon as possible.
Signing up voluntarily for the “bedding in process” between November 2012 and April 2013 is supposed to avoid penalties for data error. There are deadlines to do this which are as early as 20 April 2012.
It should be noted that the Revenue will not be accepting submissions in January and February 2013 as this is a busy time for their system to cope with Self Assessment – not a good sign that their computer will be man enough to cope with such a complicated process!
Robinson Reed Layton have held two workshops on RTI to show employers how to be RTI ready and how to process their payrolls with confidence.
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