Real Time Information (RTI)

In July 2010 HMRC published a discussion paper titled Improving the Operation of Pay As You Earn (PAYE) which focused on improving the timeliness of the transmission of information to HMRC as a way of reducing costs for both employers and HMRC, and for improving customer service to both employers and employees.

The paper introduced the concept of Real Time Information (RTI) which would be the means by which HMRC would gain information about tax and deductions automatically each time a payroll is run. It is envisaged that if employees are paid by BACS for example, the RTI data submission would form a part of the BACS transmission process.

Currently, employers and pension providers send information about tax, National Insurance contributions (NICs) and other payroll deductions to HMRC after the end of each tax year. The result is that HMRC cannot correct mistakes until the employer sends this information.

However, under RTI, employers and pension providers will tell HMRC about tax, NICs and other deductions when or before the payments are made.

What are the RTI proposals?

• Employers would provide information to HMRC whenever they do their regular payroll run.
• The P35/P14 annual submission process would not be necessary.
• RTI submissions will be tied in to bank or BACs payment software.
• Small employers (less than 50 staff) who do not pay by BACs will be able to submit using other software or an agent.
• It is not envisaged that the PAYE payment dates for employers will change from the 19th and 22nd of the month following.
• Benefits in Kind are not included in the proposals.

What do HMRC see as the benefits?

• The PAYE process will be made simpler and less burdensome for employers.
• Costs will be reduced for HMRC and enable it to deal with non-compliance (such as late payment and debt collection) more effectively.
• It will support the payment of Universal Credits.
• It will make PAYE more accurate for individuals, over time reducing the number of bills and repayments sent after the end of the tax year.
• It will reduce Tax Credits error and fraud.
• Information gathering will be more timely information enabling HMRC to get more employees tax right in the year rather than later.
• There will be a reduction in queries to HMRC.
• It will encourage a better system for transfer of information when someone changes their job.
• There will be less administration.
• It will enable better debt management in respect of employers.

What is the proposed RTI timetable?

Initially the plan was to start testing RTI systems with a sample of employers in April 2012 with a view to completion of roll out to all employers by October 2013. However, there has been a delay and it is now proposed that testing will not commence until April 2013 therefore, completion will not potentially be until October 2014.

To download this as a factsheet click here.

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