HMRC's latest reporting system could hide a nasty surprise

By Hannah Jordan, Wednesday 03 October 2012

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Real Time Information is HMRC's scheme to streamline tax and benefit payment, but a lack of publicity has left many businesses underprepared

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You could be forgiven for losing track of the raft of schemes, initiatives, pilots and programmes, which have eminated from various government departments since the coalition came to power, that have promised to streamline this or simplify that for the business community.

We have heard much about the ‘Red tape challenge’, for example, which promised to strip away unnecessary bureaucracy for business owners, particularly for SMEs, in matters such as health and safety and accounting.

But one such scheme appears to have crept up on us without being noticed, and certainly it would seem, without being adequately publicised when considering the scale of impact it will most definitely have on employers nationwide.

Real Time Information (RTI). Heard of it? No? Indeed, you are not alone. In fact, of the dozens of printers, large and small, contacted in the researching of this article, only two had heard of this new system of reporting Pay As You Earn (PAYE), which, by this time next year, will
be compulsory for all employers in the UK.

RTI, which is currently being piloted by around 310 of the largest employers nationwide, is a new online system for employers and pension providers to report their PAYE information, such as pay, tax and deductions from employees’ pay, to HM Revenue and Customs (HMRC).

Under the current system employers are required to make their reports at the end of each tax year, but under the new RTI system, they will have to send in details online every time a payment is made.

The system is primarily being brought in to support the Universal Credit system, a single payment stream for benefit claimants, which comes into effect from next October.

The idea is that by filing more frequent and detailed PAYE data using RTI, claimants will receive a simplified single benefit payment calculated on exactly how much and how often they have worked each month.

In theory, this all sounds like a good idea – streamline the system so that eligible employees get exactly what is owed to them and reduce the administrative burden of business by some £300m per year.

But, with as good as no awareness of RTI among business owners at the moment, it is hard to understand how, according to HMRC, 250,000 businesses nationwide will be reporting RTI by March 2013 with the majority following suit in April and all employers complying by October.

BPIF chief executive Kathy Woodward says the lack of communication will make it harder for smaller companies to cope. She adds: "They have to make sure they are reporting exactly the right information in exactly the right format to actually meet the requirements, and some use manual payrolls – they don’t even have an electronic system in the first place. I can see the benefit in the long term, but right now this is the world’s best-kept secret."

And here’s the clanger. Get it wrong, or don’t get it at all, and you’re looking at some hefty penalties. On 6 September, HMRC closed a 10-week consultation which sought views on how to design a "simple and proportionate" penalty system for those employers who either choose not to comply or who simply get the format or facts required by RTI, wrong.

The consultation confirms that penalties, which will be subject to appeal, will be issued automatically. It also outlines the options for setting penalty levels according to the size of business and the degree of fault; HMRC will make its final decision on these after considering responses to the document.

Shock to the system
Policy adviser at the Federation of Small Businesses Priyen Patel says RTI will be a "shock to the system" for many employers and accuses HMRC of rushing RTI in to underpin the Universal Credit system without thinking it through properly.

"The penalty regime seems pretty harsh and no one is happy about it. Too many people out there are oblivious to this still. We want to see more balance in it and perhaps an extension to the rollout period," he adds.

In its submission to the consultation the Confederation of British Industry (CBI) questioned whether the "satisfactory" support that is being reported by employers involved in the RTI pilot will exist when the scheme is rolled out nationwide. It also demanded clarity over exactly what information is required from employers, calling the initial list "extremely burdensome or legally impossible for employers to collect".

Incredibly, the list includes, among other details, employees’ relationship status, partners’ details and their up-to-date addresses. The CBI says these requirements must be streamlined as soon as possible. "Additional data collection, stretching beyond workplace issues, is not acceptable to business", it said in its submission.

Patel is particularly concerned that the increased data and frequency of reporting in RTI will put a huge strain on resources for smaller employers. With the system only accessible online, he points out that although most employers will have access to the internet, many small outfits still only have a dial-up connection, which will make the process even more time-consuming.

He adds: "For those that outsource, this will be less of a concern, but their costs will increase and some will need to either purchase or update software, which although it is only a one-off cost, is a cost nonetheless."

Despite the criticism of both RTI itself and the lack of publicity it has been afforded, HMRC says the system is "on track" and intends to expand the pilot in November by giving large employers, payroll bureaux , new employers and software developers the chance to join.

You might just want to sign up if you want to avoid an arduous and lonely learning curve and some costly penalties.

A free webinar on RTI is available here


 

  • From April 2013 Real Time Information (RTI) will be the new way for employers to report Pay as You Earn (PAYE) to HMRC
  • The system is primarily being brought in to support the Universal Credit system, which will come into effect in October 2013
  • PAYE will not change but instead of making an annual report, employers will have to send details of deductions to employees pay every time a payment is made
  • RTI is currently being piloted by HMRC with around 310 volunteer employers. Around 250,000 employers will be reporting in real time by March 2013
  • The majority of employers in England will join by April and all remaining employers will report PAYE in RTI by October 2013
  • HMRC has recently consulted on a penalty system that will be put in place to ensure that employers adhere to the correct format and data required by the new system

 


READER REACTION

 

Will RTI have a detrimental impact on print businesses?

Simon Jones
Director of HR, Polestar

"We ourselves are only at the research stage at the moment. It will affect us for sure. We are talking to a couple of accountants in terms of what we need to do and what their view of it is. We aren’t looking to outsource our payroll but its whether we need to have any further software to support the new system. My initial concerns are around whether or not we need further software and whether software can do all of this or if we need to put additional resources in place, and of course there would be a cost to that."

Steve Oldham
Financial controller, BPIF

"Making submissions every time a payment is made will be far more burdensome for small business. Firms that are not already in the pilot scheme, will have to make an employer alignment submission after the 6 April 2013, to register the information of all of their active employees at the start of the tax year, prior to running their first payroll of the year under RTI. Given that they will have only just finished their payroll year-end and will then have to run their first payroll, this will likely be very hectic for companies that pay their employees weekly."

Adrian Steele
Managing director, Mercian Labels Group

"We drown in employment legislation red tape, and complying with it is a serious drain on our management time. RTI is another example of this. We are already confirmed as being RTI compliant as we chose a long time ago to outsource our payroll processing to escape the burden of these things. We don’t expect a significant increase in costs from what we have been told by our supplier, but that may change once we fully understand the additional burden post launch."

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