|Posted on 16 May, 2014 at 11:20|
Preparing to operate PAYE in real time
From 6 April 2013 employers started reporting PAYE information to HM Revenue & Customs (HMRC) in real time. You may see this referred to as Real Time Information - or RTI.
This means that employers (or their accountant, bookkeeper or payroll bureau) have to:
• send details to HMRC every time they pay an employee, at the time they pay them
• use payroll software to send this information electronically as part of their routine payroll process
You need to take several actions to prepare for operating PAYE in real time, which are set out below.
Get/update your software or use a payroll provider
To be ready to report your payroll information each payday you must do one of the following:
• get payroll software if you don't already have any (some packages are free)
• update your existing payroll software to a version with this functionality (your provider can advise on this)
• use a payroll provider (such as an accountant or payroll bureau) to do the reporting for you
Check employee data is complete
Before you start reporting PAYE in real time it's important that the data you hold in your payroll records is complete and accurate. You must check and, if necessary, update the data for all your employees or pensioners - certain details are essential such as name, date of birth and National Insurance number, and must be in full and be correct.
Check you are registered for PAYE Online
You are probably already registered for PAYE Online and have a user ID and password for PAYE Online - if so, you can skip this step. But if you're not registered yet, and you're responsible for your own payroll reporting, then you will need to register for PAYE Online because:
• PAYE Online is how you may still send certain forms to HMRC
• if an employee tax code changes, PAYE Online is one of the ways HMRC will tell you
• to send your payroll reports to HMRC, your software will need your PAYE login details
Include new information in your payroll records
When you report your payroll information in real time, you will need to send certain information that you may not already keep on your payroll system. So you'll need to inform your staff and change your processes to collect this new information - although you may not be able to include it in your payroll records until your payroll software is compatible.
Information will be needed about approximately how many hours your employees normally work in a week.
Lower paid, temporary, irregular and casual staff
You'll need to report payments to all staff no matter how much you pay them, even those earning below the Lower Earnings Limit or those paid just once a year. So you'll have to enter details of these employees onto your payroll system. Be sure to get their employment status right.
If appropriate, set the irregular payment pattern indicator so HMRC doesn't assume that they've left your employment just because they haven't worked for a while.
Recording changes to employee working patterns
As well as recording additional information when you first take a new employee on, you may need to make changes to an employee's payroll record in certain circumstances.
For example, if an employee takes unpaid leave you need to set an irregular payment indicator when you make their final payment for that period or HMRC will assume that they've left your employment.
You won't report new starters to HMRC separately any more. Their information will be automatically sent when you report your payroll information. So you'll need to have processes ready to collect and record the correct personal information from new starters. This information can be gathered and stored however you prefer - letter, email or a form. HMRC has a Starter Checklist you can use but this form, or any other records you keep, must not be sent to HMRC. You must keep your records for the current year and the three previous tax years
You won't report leavers separately any more. You must continue to provide a form P45 to employees who leave - but don't report the P45 part 1 information to HMRC using PAYE Online for employers any more. Instead, set their leaving date on their payroll record so it will be automatically reported next time you send your payroll information.
Be ready to update HMRC with your latest payroll data
When: At or before the time you send your first report to HMRC.
To make your first PAYE real time payroll report successful, the data that HMRC holds on your employees must match your payroll data. When you operate PAYE in real time you'll need to send HMRC information about every employee who's worked for you in the current tax year, even if they've already left your employment. So when you start reporting payroll information in real time you should have new software and procedures in place before you pay anyone - so that all the necessary information is stored in your payroll system ready to be reported.
Reporting your payroll information
You'll need to report your payroll information electronically, on or before any day when you pay someone. This will normally be carried out by your payroll software (or your payroll provider) at the same time that the payments are calculated, or just afterwards.
So you'll have to review the processes throughout your organisation, to check that you'll have the information you need to record and report it, on time - whether weekly or monthly.
It's important that the information you provide on these reports is right - if it's wrong it will cause you and HMRC problems, and your employees might be affected too.