Published in the Wigan Observer:

There is nothing new about the concept of Real Time Information (“RTI”) but RTI represents the biggest change to the PAYE system in decades and it’s coming to all employers next year. From April through to October 2013 all employers will be required to adopt RTI reporting to HMRC. RTI will require employers to report pay and deductions to HMRC every month, either on or before payday. At the moment this reporting process only occurs at the end of the tax year. This might sound like yet another burden on companies, but actually, running a payroll system could get a whole lot easier. For a start your payroll software should do all the reporting for you, so you will need to ensure that your software is up to date and RTI compliant. If you run a small manual payroll however you need to start looking for alternatives and HMRC’s own free Basic PAYE Tools software will do the job for up to 9 employees. Many software suppliers have been marketing their payroll software as RTI compliant for many months now, but are not necessarily pro-actively contacting their existing clients to make them aware of the impending changes. Although every employee will still require a P60 at the end of the year many of the year end returns will disappear and there will be no need to send P45s to HMRC. The monthly submission will however include details of hours worked, which is required in order for HMRC to more accurately pay tax credits. Employees should benefit from having more up to date and accurate PAYE codes, reducing the incidence of surprise demands at the end of the year (and surprise rebates too!).

Employers with over 250 employees will be required to undergo an alignment process before April as it will be necessary to eliminate any data discrepancies between the employer and HMRC. All employers should therefore review and audit their payroll data, as smaller employers will still need to align their data as well, but that will be done following their first submission. Names, addresses, National insurance codes, date of birth etc all need to be in agreement. April 2013 may be 6 months away, but, for larger employers in particular, there is much to be done. Whilst there will be benefits to the system, the initial period could prove to be troublesome if you are not prepared.