Real Time Information (RTI), which has been piloted in the UK since April this year, will be a compulsory system for employers and pension providers to report their payroll information to HMRC.
Currently employers have to report all deductions they have made from employees’ pay at the end of every year, but under RTI, which will be operational from April 2013 and compulsory for all employers by October 2013, PAYE details must be reported each time a payment is made.
Although PAYE itself will not change, as well as reporting every time a payment is made employers will also be required to send the details as part of the normal payroll process. All details must also be sent electronically via RTI payroll software.
The new system is being implemented in time for the introduction of the Universal Credit, which HMRC claims will ensure that eligible employees will get the right amount of benefits or tax credits each month.
More than 310 volunteer employers have been piloting RTI with HMRC since April this year and it will be rolled out progressively nationwide between April and October 2013.
From October a penalty system will be put in place, on which HMRC is currently consulting, which will automatically charge employers that enter reports late or in the wrong format.
HMRC said it would consider options for calculating RTI penalties for different sizes of employer and for various degrees of default, as well as how often penalties should be charged.
Commenting on the RTI pilot progress an HMRC spokesman said: "RTI is on track and the pilot is going very well.
"We started the pilot in April with just 10 employers and now we’ve successfully received over 1.9m individual records from over 1,300 PAYE schemes."
However BPIF chief executive Kathy Woodward said that although the system would be beneficial and more efficient in the long term, many employers were still in the dark over what they needed to do to conform.
She added: "In the long term it is probably a reasonable introduction but undoubtedly in the short term it puts additional burdens on small companies and whilst those who don’t have their own payroll systems can use the free HMRC software, there will still be work to cleanse their data to ensure that it is in the appropriate format.
"The worry is that HMRC feel that they have piloted the project and communicated effectively but there is wide scale ignorance amongst most small and larger employers and the scheme is to be introduced in April of next year."
New employer PAYE pilot scheme 'on track'
The national pilot for a compulsory new Pay as You Earn (PAYE) reporting system for employers is proving a success, according to HM Revenue and Customs (HMRC).
