The introduction of Real Time Information (RTI) is part of a larger scheme being implemented by the government over the next couple of years. The idea is that employers will tell HMRC exactly how much everyone is getting paid every month. HMRC will then use this information to instantly calculate benefit and tax credit payments. The aim is to make the whole system much more responsive and to eliminate the lag and delays in payments which can currently be caused when people change jobs or get a pay rise.
RTI began to be implemented in October this year starting with a few very large employers. More companies are being encouraged to join the scheme every month. All new employers have been expected to use RTI since 6th November 2012. Every business in the UK is due to be on the RTI scheme from by April 2013. From that point HMRC will start fining businesses who provide inaccurate or late information.
For most big employers RTI will involve feeding payroll information direct from their payroll software into the HMRC’s computer systems. But obviously this involves using specialist payroll software which needs to be set-up correctly. HMRC suggest two ways for new employers to get RTI set-up. These are:
- operate your payroll using payroll software to submit your PAYE returns – this can be commercial software or HMRC’s Basic PAYE Tools
- use the services of a payroll bureau or agent who will submit these returns using software on your behalf
You can download HMRC’s Basic PAYE tool from their website. HMRC also have a list of commercial software suppliers who can provide RTI compatible products. For many small businesses setting up and running their own payroll systems can be a very expensive and time consuming activity. It may be easier for many start-ups to employ a payroll company, or their accountants, to do the work for them. Once of the benefits of doing things this way is that much of the responsibility and expense for implementing the RTI changes will fall onto them rather than having to take it all on in-house.
As HMRC point out you do not have to start using RTI yet, unless you are explicitly told to, but you will have to being doing it from April 2013. It therefore makes sense for new employers use RTI from the start rather than changing systems later on.