From 6 October 2014 the HMRC computer will automatically issue you with a penalty if you submit your full payment submission (FPS) under RTI "late", or don't submit it at all for a month in which you paid your employees.
So what makes the FPS "late"? HMRC say the FPS must be submitted on or before the day the employer pays the employees (the "payment date"). But is that the day the funds leave the employer's bank account or the day the employee receives the money?
In fact the "payment date" for RTI purposes is neither of these dates. It is the date contractually agreed between the employer and the employee to be the date on which the employee is to be paid. If the funds happen to be passed to the employee on an earlier or later date, perhaps due to a bank holiday, that doesn't change the "payment date". This is explained in HMRC's RTI guidance on non-banking days.
So whatever the payment date is in your employee's contract (verbal or written), that is the date that you should enter in the payroll software as the regular payment date. As long as the FPS is submitted before that regular payment date, you should be able to avoid any late filing penalty.
In fact you will be allowed one late filing per tax year without incurring a penalty. The HMRC computer will warn you that you have submitted your FPS late by sending an electronic notice sent through HMRC's PAYE online service. You may have already received some of these electronic warning messages, but at present no penalties have been issued. If you receive any more late filing warnings do let us know as the late filing penalties can be up to £400 per month for large payrolls.
Showing posts with label RTI. Show all posts
Showing posts with label RTI. Show all posts
Friday, 5 September 2014
Monday, 7 July 2014
Real Time Information (RTI) Penalty Notices
As an employer you may have received an RTI penalty warning letter accusing you of not submitting all of the RTI returns required for 2013/14. However, that letter may be incorrect.
HMRC has admitted that its computer has churned out inappropriate penalty warning letters to employers who have submitted employer payment summaries (EPS) during 2013/14. If you have submitted all the required RTI returns for the tax year you can ignore the warning letter, as a penalty will not be charged.
This "cry wolf" by HMRC sets a dangerous precedent, as you may be inclined to ignore further RTI penalty warning letters that could be issued later this year.
From October 2014 new penalties come into effect where the monthly full payment submission (FPS) is submitted late, or an EPS is not submitted where a FPS is not required as no payments are made. If or when those new penalties arrive you will be able to appeal against the penalty online. Note this online appeal system is not up and running yet.
From October 2014 the FPS will contain a new box that allows you to tell HMRC why the FPS is apparently late, perhaps because you are taking advantage of the concession for payrolls with nine or fewer employees.
The EPS will also be changed in October so it will relate to a particular tax month. This will avoid the need to file the EPS in the window of 20th of the current month to 19th of the following month to ensure it is applied by HMRC to the appropriate tax month.
HMRC has admitted that its computer has churned out inappropriate penalty warning letters to employers who have submitted employer payment summaries (EPS) during 2013/14. If you have submitted all the required RTI returns for the tax year you can ignore the warning letter, as a penalty will not be charged.
This "cry wolf" by HMRC sets a dangerous precedent, as you may be inclined to ignore further RTI penalty warning letters that could be issued later this year.
From October 2014 new penalties come into effect where the monthly full payment submission (FPS) is submitted late, or an EPS is not submitted where a FPS is not required as no payments are made. If or when those new penalties arrive you will be able to appeal against the penalty online. Note this online appeal system is not up and running yet.
From October 2014 the FPS will contain a new box that allows you to tell HMRC why the FPS is apparently late, perhaps because you are taking advantage of the concession for payrolls with nine or fewer employees.
The EPS will also be changed in October so it will relate to a particular tax month. This will avoid the need to file the EPS in the window of 20th of the current month to 19th of the following month to ensure it is applied by HMRC to the appropriate tax month.
Monday, 2 June 2014
Real Time Information (RTI) Interest
In the past some employers would play the PAYE system, holding on to the PAYE deductions until the last payment date of the year, and then paying the balance due before interest was charged. That is no longer possible under real time information (RTI), as interest is now charged on late paid PAYE and CIS deductions on a monthly basis throughout the tax year.
The interest is applied to payments which fall due on and after 19 May 2014, which are paid late. If you check your business tax dashboard on the HMRC website, you may see interest accrued from 19th of the month. Where you pay the PAYE due electronically the payment is due by 22nd of the month. In the case of an electronic payment the interest charged from 19th to 22nd should be cancelled.
However, there is a known problem which HMRC are working to fix. If your business made no full payment submissions (FPS) for a tax month (perhaps because no wages were paid), HMRC may have estimated the PAYE due and added that estimated amount to your PAYE account. The estimated PAYE debt is called a "specified charge". Interest accrues on the specified charge as if it was real PAYE due.
The way to get rid of a specified charge is to submit a nil Employer Payment Summary (EPS) for each of the tax months for which the specified charge has been raised for. This should also remove the interest accrued on the specified charge, but currently it doesn't. HMRC say this interest will not be pursued, and it will be removed from the PAYE account when the software is fixed.
The interest is applied to payments which fall due on and after 19 May 2014, which are paid late. If you check your business tax dashboard on the HMRC website, you may see interest accrued from 19th of the month. Where you pay the PAYE due electronically the payment is due by 22nd of the month. In the case of an electronic payment the interest charged from 19th to 22nd should be cancelled.
However, there is a known problem which HMRC are working to fix. If your business made no full payment submissions (FPS) for a tax month (perhaps because no wages were paid), HMRC may have estimated the PAYE due and added that estimated amount to your PAYE account. The estimated PAYE debt is called a "specified charge". Interest accrues on the specified charge as if it was real PAYE due.
The way to get rid of a specified charge is to submit a nil Employer Payment Summary (EPS) for each of the tax months for which the specified charge has been raised for. This should also remove the interest accrued on the specified charge, but currently it doesn't. HMRC say this interest will not be pursued, and it will be removed from the PAYE account when the software is fixed.
Thursday, 6 March 2014
Real Time Information (RTI) Penalties
HMRC has experienced significant problems in reconciling amounts of PAYE due from employers, to the amounts reported under real time information (RTI). As a result some of the automatic RTI penalties which were to apply from 6 April 2014, will now apply from:
- October 2014 for late filing of in-year RTI reports; and
- April 2015 for late payment of in-year PAYE due.
If you are late with filing your last RTI report (known as the final submission for the year) for 2013/14, a £100 penalty will apply. This penalty continues to mount-up at £100 per month, or part month, for each batch of 50 employees on the payroll, until the final submission is received by HMRC.
The full payment summary (FPS) for the last tax month will normally be your final submission for the tax year. This FPS should be submitted on or before the last pay day in the tax year, or by 5 April 2014 where you take advantage of the concession for small businesses.
You should not submit forms P35 or P14 for 2013/14 as the information on those forms is included on the final FPS or EPS submitted for the tax year.
If no employees are paid in the final tax month of the year you should submit an employer payment summary (EPS) as the final submission for the year. This EPS should reach HMRC by 19 April 2014. The EPS can also be used as the final submission if the last FPS for the year was not marked as the final submission for the year.
We can help you with the end of year payroll procedures if you are uncertain about what you need to do.
For clients who take advantage of our payroll services we will be contacting you in the next week to gather the final information we need to process your final year end submissions.
- October 2014 for late filing of in-year RTI reports; and
- April 2015 for late payment of in-year PAYE due.
If you are late with filing your last RTI report (known as the final submission for the year) for 2013/14, a £100 penalty will apply. This penalty continues to mount-up at £100 per month, or part month, for each batch of 50 employees on the payroll, until the final submission is received by HMRC.
The full payment summary (FPS) for the last tax month will normally be your final submission for the tax year. This FPS should be submitted on or before the last pay day in the tax year, or by 5 April 2014 where you take advantage of the concession for small businesses.
You should not submit forms P35 or P14 for 2013/14 as the information on those forms is included on the final FPS or EPS submitted for the tax year.
If no employees are paid in the final tax month of the year you should submit an employer payment summary (EPS) as the final submission for the year. This EPS should reach HMRC by 19 April 2014. The EPS can also be used as the final submission if the last FPS for the year was not marked as the final submission for the year.
We can help you with the end of year payroll procedures if you are uncertain about what you need to do.
For clients who take advantage of our payroll services we will be contacting you in the next week to gather the final information we need to process your final year end submissions.
Friday, 3 January 2014
New RTI Relief
Have you been struggling to send full payment summary (FPS) reports under RTI to HMRC on or before the days on which your employees are paid? This is particularly difficult when your workers receive irregular amounts of pay on varying dates. In such cases you may not know the amounts of wages and deductions to report until the workers have finished their shifts.
The concession for small employers with fewer than 50 employees has helped. This allows you to submit all the figures on one FPS report when you make your last payroll run in the month, but this must be no later than the end of the tax month. However, this concession is due to end on 5 April 2014.
The good news is that until 5 April 2016, employers with fewer than 10 workers will be able to send in the FPS covering all payments by the last pay day of the tax month. This new relaxation will only apply to existing employers. Any new PAYE scheme commencing on or after 6 April 2014, or any scheme with 10 or more employees will have to report all the wages and deductions on or before each day the employees are paid, even if that is multiple times in the month.
If you have 10 to 50 employees on your payroll, and have been using the small employer concession to cope with multiple pay dates in a month, we need to talk about how to adjust your systems from April 2014.
The concession for small employers with fewer than 50 employees has helped. This allows you to submit all the figures on one FPS report when you make your last payroll run in the month, but this must be no later than the end of the tax month. However, this concession is due to end on 5 April 2014.
The good news is that until 5 April 2016, employers with fewer than 10 workers will be able to send in the FPS covering all payments by the last pay day of the tax month. This new relaxation will only apply to existing employers. Any new PAYE scheme commencing on or after 6 April 2014, or any scheme with 10 or more employees will have to report all the wages and deductions on or before each day the employees are paid, even if that is multiple times in the month.
If you have 10 to 50 employees on your payroll, and have been using the small employer concession to cope with multiple pay dates in a month, we need to talk about how to adjust your systems from April 2014.
Tuesday, 3 December 2013
RTI Penalties Around The Corner
This tax year (2013/14) is the first year in which the majority of employers have submitted their PAYE data using real time information (RTI). HMRC has not yet imposed penalties for late RTI submissions made within the tax year, but that is about to change.
From 6 April 2014 penalties will start to accrue after the first failure in each of these situations:
- filing a full payment submission (FPS) after the date of payment stated in that report;
- failure to file an employer payment summary (EPS) showing a nil payment when required; and
- failure to pay the PAYE due in full, and on time for a particular tax month.
Note that currently there is a concession for employers with fewer than 50 employees. If all the conditions apply they can file just one FPS by the end of the tax month, irrespective of the number of times they have paid employees in that month. This concession is due to end on 5 April 2014.
The penalties for late submissions will vary according to the number of employees on the payroll. The smallest payroll with up to 9 employees will suffer a £100 penalty for every month for which the FPS is filed late. Larger payrolls will be charged £200, £300 or £400 per month for the same failure, for up to 11 months per tax year. If the employees are paid more frequently than monthly, only one fixed penalty will be applied per month.
Where no payment has been made to employees in the month HMRC expect to receive an EPS reporting a nil payment, unless the PAYE scheme has been registered as 'annual'. If no nil EPS is received this will give rise to a penalty.
Penalties for late paid PAYE already apply, but such penalties have not been imposed so far. Late payment penalties are charged at 1% to 4% of the amount that is paid late for the tax month, with the penalty percentage increasing as the number of months of late payment mounts up in the tax year.
You will be informed that a penalty is potentially due by an automatic electronic message from HMRC. These messages are already being sent for late FPS, but they are just warnings at this stage. Other types of warning messages will commence in the next few weeks. Where a penalty is due for a tax month it will be imposed at the end of the tax quarter.
Please talk to us if you get any warning messages from HMRC, as we need to sort out why there is an apparent fault in submitting RTI reports or paying the right amount of PAYE.
From 6 April 2014 penalties will start to accrue after the first failure in each of these situations:
- filing a full payment submission (FPS) after the date of payment stated in that report;
- failure to file an employer payment summary (EPS) showing a nil payment when required; and
- failure to pay the PAYE due in full, and on time for a particular tax month.
Note that currently there is a concession for employers with fewer than 50 employees. If all the conditions apply they can file just one FPS by the end of the tax month, irrespective of the number of times they have paid employees in that month. This concession is due to end on 5 April 2014.
The penalties for late submissions will vary according to the number of employees on the payroll. The smallest payroll with up to 9 employees will suffer a £100 penalty for every month for which the FPS is filed late. Larger payrolls will be charged £200, £300 or £400 per month for the same failure, for up to 11 months per tax year. If the employees are paid more frequently than monthly, only one fixed penalty will be applied per month.
Where no payment has been made to employees in the month HMRC expect to receive an EPS reporting a nil payment, unless the PAYE scheme has been registered as 'annual'. If no nil EPS is received this will give rise to a penalty.
Penalties for late paid PAYE already apply, but such penalties have not been imposed so far. Late payment penalties are charged at 1% to 4% of the amount that is paid late for the tax month, with the penalty percentage increasing as the number of months of late payment mounts up in the tax year.
You will be informed that a penalty is potentially due by an automatic electronic message from HMRC. These messages are already being sent for late FPS, but they are just warnings at this stage. Other types of warning messages will commence in the next few weeks. Where a penalty is due for a tax month it will be imposed at the end of the tax quarter.
Please talk to us if you get any warning messages from HMRC, as we need to sort out why there is an apparent fault in submitting RTI reports or paying the right amount of PAYE.
Monday, 4 November 2013
New RTI Messages
Real time information (RTI) is all about one-way communications with HMRC. Your payroll software sends reports (called FPS or EPS) to HMRC about the deductions made from your employees' pay, and normally you hear nothing back.
That is starting to change. HMRC is now sending electronic messages to employers to inform them that not all is well with their RTI reports. The first messages concern late submitted FPS reports, but in future there will be messages about late paid PAYE and missing RTI reports.
It is important to get the FPS in on time as then HMRC know that the amount of PAYE paid for the month agrees with the deductions you have reported on the FPS. HMRC will not impose penalties for any late FPS submitted within 2013/14, although the final FPS for 2013/14 (which closes the tax year), can carry a penalty if that is significantly late. The messages about late FPS reports are thus just a warning from HMRC in this tax year, but may indicate there is something wrong with your systems.
From 6 April 2014 there will be automatic penalties for filing a FPS late within the tax year. 'Late' means it arrives with HMRC after the date on which the employees were paid. There will also be penalties for paying PAYE late.
In order to pick up these electronic messages from HMRC you need to use your payroll software, or log on to HMRC's PAYE online services, then look for notifications. The messages are also available using the HMRC's PAYE desktop viewer (PDV) software package. However, the PDV has just been updated so you may need to download the latest version first.
These electronic messages about FPS will be the first of many important messages concerning RTI, so you need to get used to looking for them.
That is starting to change. HMRC is now sending electronic messages to employers to inform them that not all is well with their RTI reports. The first messages concern late submitted FPS reports, but in future there will be messages about late paid PAYE and missing RTI reports.
It is important to get the FPS in on time as then HMRC know that the amount of PAYE paid for the month agrees with the deductions you have reported on the FPS. HMRC will not impose penalties for any late FPS submitted within 2013/14, although the final FPS for 2013/14 (which closes the tax year), can carry a penalty if that is significantly late. The messages about late FPS reports are thus just a warning from HMRC in this tax year, but may indicate there is something wrong with your systems.
From 6 April 2014 there will be automatic penalties for filing a FPS late within the tax year. 'Late' means it arrives with HMRC after the date on which the employees were paid. There will also be penalties for paying PAYE late.
In order to pick up these electronic messages from HMRC you need to use your payroll software, or log on to HMRC's PAYE online services, then look for notifications. The messages are also available using the HMRC's PAYE desktop viewer (PDV) software package. However, the PDV has just been updated so you may need to download the latest version first.
These electronic messages about FPS will be the first of many important messages concerning RTI, so you need to get used to looking for them.
Monday, 16 September 2013
Universal Credit
If you or your partner currently receive any of the following then Universal Credit will eventually affect you:
• Working tax credit
• Child tax credits
• Income based job seekers allowance
• Income related employment and support allowance
• Income support
• Housing benefit
Universal credit is the government’s attempt to simplify the welfare system and to provide a greater incentive for people on benefits to work by ensuring they do not lose out financially. The government also hopes that it will reduce the amount of over/underpayment errors and fraud within the system.
It is already being trialed in parts of Greater Manchester and Cheshire and will be rolled out across the rest of the UK in phases between October 2013 and October 2017.
Claims for UC will be joint, as is currently the case for tax credits, but instead of weekly or fortnightly payments, under UC a single payment for the household will be made directly to a bank or building society account once a month. All claims will have to be made online.
The Department of Work and Pensions will receive information about earnings from HMRC (under Real Time Information reporting) and this will allow them to adjust the UC payment each month based on changes to income levels.
If you receive any of the benefits or credits listed above there is nothing you need to right now - continue to claim as normal and keep the DWP up to date with any changes to your circumstances.
• Working tax credit
• Child tax credits
• Income based job seekers allowance
• Income related employment and support allowance
• Income support
• Housing benefit
Universal credit is the government’s attempt to simplify the welfare system and to provide a greater incentive for people on benefits to work by ensuring they do not lose out financially. The government also hopes that it will reduce the amount of over/underpayment errors and fraud within the system.
It is already being trialed in parts of Greater Manchester and Cheshire and will be rolled out across the rest of the UK in phases between October 2013 and October 2017.
Claims for UC will be joint, as is currently the case for tax credits, but instead of weekly or fortnightly payments, under UC a single payment for the household will be made directly to a bank or building society account once a month. All claims will have to be made online.
The Department of Work and Pensions will receive information about earnings from HMRC (under Real Time Information reporting) and this will allow them to adjust the UC payment each month based on changes to income levels.
If you receive any of the benefits or credits listed above there is nothing you need to right now - continue to claim as normal and keep the DWP up to date with any changes to your circumstances.
Wednesday, 31 July 2013
RTI for Seasonal Workers
Have you taken on casual workers this summer? Perhaps you are paying piece-rates for the amount of produce picked or packed by each person. Reporting such small and variable payments under the new RTI system is a significant hassle.
The RTI rules require you to report each payment to workers on or before the date of the payment. Fortunately you may be able to use one of these two concessions to ease your RTI reporting burden:
a) Where you pay your causal workers daily or more than once a week, but the amounts paid are less than £109 per person per week, you can send RTI reports to HMRC weekly; or
b) Where the total number of your employees, including casual workers, is less than 50, you can send your RTI reports to HMRC on a monthly basis.
Concession b) will only apply for payments made before 6 April 2014.
Your casual workers are likely to have no set working hours for each week. In effect they will be on a zero-hours contract; paid for the hours they work, but otherwise not at all. In such cases you should choose option D of hours worked on the FPS report under RTI.
The Government wants employers to report data on the hours worked by employees in order to prevent fraud in the Tax Credits system. Under Universal Credit the hours worked will not be relevant to the employee's claim, so in time when all claimants are moved from Tax Credits to Universal Credit, the requirement to report hours worked should be dropped.
The RTI rules require you to report each payment to workers on or before the date of the payment. Fortunately you may be able to use one of these two concessions to ease your RTI reporting burden:
a) Where you pay your causal workers daily or more than once a week, but the amounts paid are less than £109 per person per week, you can send RTI reports to HMRC weekly; or
b) Where the total number of your employees, including casual workers, is less than 50, you can send your RTI reports to HMRC on a monthly basis.
Concession b) will only apply for payments made before 6 April 2014.
Your casual workers are likely to have no set working hours for each week. In effect they will be on a zero-hours contract; paid for the hours they work, but otherwise not at all. In such cases you should choose option D of hours worked on the FPS report under RTI.
The Government wants employers to report data on the hours worked by employees in order to prevent fraud in the Tax Credits system. Under Universal Credit the hours worked will not be relevant to the employee's claim, so in time when all claimants are moved from Tax Credits to Universal Credit, the requirement to report hours worked should be dropped.
Monday, 1 July 2013
RTI Relaxation Extended
The temporary relaxation of the RTI reporting requirements for small employers has been extended to 5 April 2014. It was due to apply only until 5 October 2013.
Under RTI you are supposed to send a full payment submission (FPS) report to HMRC every time you pay employees, on or before the date of payment. This could mean sending a FPS every week, or even every day if you pay some casuals daily.
The relaxation applies to employers with fewer than 50 employees who pay staff weekly, or more frequently, but who run their payroll once a month. These employers can submit their full payment submission (FPS) at the time of the payroll run. However, the FPS must reach HMRC by the end of the tax month (5th).
The Taxman's own figures show that one in six payments under RTI has been reported using the current relaxation. In spite of this strong evidence that the reporting relaxation is needed, HMRC has insisted that all employers will be required to make RTI reports on or before each payment day from 6 April 2014.
If you have still not sent any reports under RTI, you will shortly receive a letter from HMRC and possibly an estimated tax demand. Ask us for advice before paying any tax demanded!
Under RTI you are supposed to send a full payment submission (FPS) report to HMRC every time you pay employees, on or before the date of payment. This could mean sending a FPS every week, or even every day if you pay some casuals daily.
The relaxation applies to employers with fewer than 50 employees who pay staff weekly, or more frequently, but who run their payroll once a month. These employers can submit their full payment submission (FPS) at the time of the payroll run. However, the FPS must reach HMRC by the end of the tax month (5th).
The Taxman's own figures show that one in six payments under RTI has been reported using the current relaxation. In spite of this strong evidence that the reporting relaxation is needed, HMRC has insisted that all employers will be required to make RTI reports on or before each payment day from 6 April 2014.
If you have still not sent any reports under RTI, you will shortly receive a letter from HMRC and possibly an estimated tax demand. Ask us for advice before paying any tax demanded!
Friday, 31 May 2013
RTI Growing Pains
The Taxman is also causing RTI pains for employers and employees by issuing duff data.
Incorrect NI numbers
When you submit a FPS or NI number verification request (NVR), the Taxman should reply with any missing or corrected NI numbers. However, in some cases the NI numbers the Taxman has returned to employers have no suffix letter (A, B, C or D).
The Taxman says you should use the NI number he has sent to you in your payroll software, but to leave the last digit blank by typing a space using the space bar. This may not be a workable solution, because most payroll software will reject any NI number with less than nine characters. We're hoping for an HMRC update on this issue!
Sometimes a long standing NI number has been replaced, but the old NI number is quoted on official notices. This indicates a possible data corruption problem within the HMRC machine. You should exercise caution when amending any NI numbers notified by HMRC since 6 April 2013, and talk to us if in doubt.
Incorrect PAYE codes
Where you have submitted an FPS or employer alignment submission (EAS), which did not include all the employees normally on your payroll, without indicating that the EAS was a part submission, the Taxman has assumed that any missing employees have left your employment.
Subsequently when you submit a FPS including one of those missing employees, that employee is treated as a new starter, with a new employment record. Any details of benefits in the PAYE code belonging to that employee haven't been carried over to his new employment record. Thus his new PAYE code may be wrong.
The Taxman has advised employers in this position to use the old PAYE code for the employee. However, under the PAYE regulations employers are not permitted to take a view on which PAYE codes to apply and which to ignore. Many payroll software packages download the PAYE codes directly from HMRC and apply them automatically, with no human intervention.
The employer helpline will not discuss employee's tax codes with an employer, so the only way to straighten out the mess is to get the employee to contact the Taxman directly.
Incorrect NI numbers
When you submit a FPS or NI number verification request (NVR), the Taxman should reply with any missing or corrected NI numbers. However, in some cases the NI numbers the Taxman has returned to employers have no suffix letter (A, B, C or D).
The Taxman says you should use the NI number he has sent to you in your payroll software, but to leave the last digit blank by typing a space using the space bar. This may not be a workable solution, because most payroll software will reject any NI number with less than nine characters. We're hoping for an HMRC update on this issue!
Sometimes a long standing NI number has been replaced, but the old NI number is quoted on official notices. This indicates a possible data corruption problem within the HMRC machine. You should exercise caution when amending any NI numbers notified by HMRC since 6 April 2013, and talk to us if in doubt.
Incorrect PAYE codes
Where you have submitted an FPS or employer alignment submission (EAS), which did not include all the employees normally on your payroll, without indicating that the EAS was a part submission, the Taxman has assumed that any missing employees have left your employment.
Subsequently when you submit a FPS including one of those missing employees, that employee is treated as a new starter, with a new employment record. Any details of benefits in the PAYE code belonging to that employee haven't been carried over to his new employment record. Thus his new PAYE code may be wrong.
The Taxman has advised employers in this position to use the old PAYE code for the employee. However, under the PAYE regulations employers are not permitted to take a view on which PAYE codes to apply and which to ignore. Many payroll software packages download the PAYE codes directly from HMRC and apply them automatically, with no human intervention.
The employer helpline will not discuss employee's tax codes with an employer, so the only way to straighten out the mess is to get the employee to contact the Taxman directly.
No RTI Reports Made?
Employers were told that they had to use real time information (RTI) to report PAYE deductions from the first pay day on or after 6 April 2013. But what if there has been no pay day since 6 April, because no one has been paid? In that case RTI does apply from 6 April 2013 onwards. You need to make an RTI report for every tax month, unless your PAYE scheme has been registered as an annual scheme. Annual PAYE schemes can make just one RTI report for the month in which the salary is paid.
If you are within RTI you can't use the link on the HMRC website to report that no PAYE is due. You have to submit an employer payment summary (EPS) after the end of the tax month (5th) and before the payment date of the 19th.
Even if you pay your PAYE over to HMRC on a quarterly basis, you still have to submit an EPS or a full payment submission (FPS) for every tax month.
If in earlier tax years you had a history of paying PAYE to HMRC for every month or quarter, and you haven't submitted any RTI reports so far, HMRC may well send you an estimated PAYE demand called a specified charge. The only way to get out of paying a specified charge is to submit an EPS or FPS under RTI for the missing periods in 2013/14.
If you are within RTI you can't use the link on the HMRC website to report that no PAYE is due. You have to submit an employer payment summary (EPS) after the end of the tax month (5th) and before the payment date of the 19th.
Even if you pay your PAYE over to HMRC on a quarterly basis, you still have to submit an EPS or a full payment submission (FPS) for every tax month.
If in earlier tax years you had a history of paying PAYE to HMRC for every month or quarter, and you haven't submitted any RTI reports so far, HMRC may well send you an estimated PAYE demand called a specified charge. The only way to get out of paying a specified charge is to submit an EPS or FPS under RTI for the missing periods in 2013/14.
Friday, 29 March 2013
RTI Relaxation
The real time information (RTI) system for submitting PAYE information to HMRC must be used by small employers for all pay days on and after 6 April 2013. However, at the last minute the Government has agreed to a temporary relaxation of one of the RTI reporting requirements for employers with fewer than 50 employees.
If you fall into that category, and you pay some employees more frequently than once a month, you can send your RTI report known as full payment submission (FPS), to HMRC when you run your monthly payroll. You would normally have to send in a FPS every time you pay an employee.
However, there are conditions:
- The payroll run must be made before the end of the tax month, i.e. by 5 May for employees paid in April; and
- The relaxation also only applies for RTI reports submitted up until 5 October 2013.
Remember, this is not a postponement of RTI, it is a small and temporary change to one reporting rule. You still need to use new or updated payroll software to report payroll data under RTI for all pay dates on or after 6 April 2013.
If you fall into that category, and you pay some employees more frequently than once a month, you can send your RTI report known as full payment submission (FPS), to HMRC when you run your monthly payroll. You would normally have to send in a FPS every time you pay an employee.
However, there are conditions:
- The payroll run must be made before the end of the tax month, i.e. by 5 May for employees paid in April; and
- The relaxation also only applies for RTI reports submitted up until 5 October 2013.
Remember, this is not a postponement of RTI, it is a small and temporary change to one reporting rule. You still need to use new or updated payroll software to report payroll data under RTI for all pay dates on or after 6 April 2013.
Tuesday, 5 March 2013
Annual Payroll and RTI
Under real time information (RTI) PAYE reporting, a Full Payment Submission (FPS) report is required to be made to HMRC every time an employee is paid, not just once after the end of the tax year as is currently the case. RTI will be compulsory for most employers from the first pay date following 6 April 2013.
Many one-person companies may wish to pay the director just once a year and avoid monthly RTI reporting. If you want to do this, you must first check that your payroll software will cope with an annual payroll, as many main-stream payroll software packages do not.
The second stage is to understand what reports HMRC will require under RTI. An annual payroll must be registered with HMRC. The current advice on the HMRC website says: "If all payments on which tax and NICs are due are paid to your employees annually in a single tax month, you can ask HMRC to be treated as an 'annual payer'. You must use the same month every year, so if this changes or you start paying your employees more frequently, you will need to tell HMRC."
There should be more guidance on the HMRC website about annual payrolls soon. If you do not register the payroll as being annual you will need to submit an Employer Payment Summary (EPS) to HMRC every month, which shows nil payments made to the employee.
Where an employee is paid irregularly, i.e. less often than once a month, it is essential that the irregular payment marker is made in the payroll software against that employee, as otherwise the HMRC computer system may delete that person from the payroll.
If you want to pay yourself a regular amount every month, and minimise the RTI reporting hassle, your payroll software may allow you to prepare all the FPS returns for the entire year in advance. However, you must check whether your particular payroll software will do this. You won't be able to prepare monthly FPS returns for the entire year in arrears, those FPS reports must be done in advance or at the time of payment.
If you need any advice about RTI please contact us.
Many one-person companies may wish to pay the director just once a year and avoid monthly RTI reporting. If you want to do this, you must first check that your payroll software will cope with an annual payroll, as many main-stream payroll software packages do not.
The second stage is to understand what reports HMRC will require under RTI. An annual payroll must be registered with HMRC. The current advice on the HMRC website says: "If all payments on which tax and NICs are due are paid to your employees annually in a single tax month, you can ask HMRC to be treated as an 'annual payer'. You must use the same month every year, so if this changes or you start paying your employees more frequently, you will need to tell HMRC."
There should be more guidance on the HMRC website about annual payrolls soon. If you do not register the payroll as being annual you will need to submit an Employer Payment Summary (EPS) to HMRC every month, which shows nil payments made to the employee.
Where an employee is paid irregularly, i.e. less often than once a month, it is essential that the irregular payment marker is made in the payroll software against that employee, as otherwise the HMRC computer system may delete that person from the payroll.
If you want to pay yourself a regular amount every month, and minimise the RTI reporting hassle, your payroll software may allow you to prepare all the FPS returns for the entire year in advance. However, you must check whether your particular payroll software will do this. You won't be able to prepare monthly FPS returns for the entire year in arrears, those FPS reports must be done in advance or at the time of payment.
If you need any advice about RTI please contact us.
Monday, 7 January 2013
RTI - More Information
The rules for reporting wages, hours worked and payroll deductions under real time information (RTI) are still being written.
What to report
RTI reports will need to be made where at least one employee is paid above the lower earnings limit (LEL), (£109 per week for 2013/14). For wages between the LEL and the Primary threshold (£149 per week for 2013/14) the worker is given NI credits although they don't actually pay any NI, so the level of their wages needs to be reported.
A major difference between RTI and the current system, is that once the employer is reporting under RTI, reports must be made for each employee even if no tax or NI are deducted for a particular period. This because RTI has two functions; - to report deductions to HMRC and to report net pay for each worker to the Department of Work and Pensions (DWP) to allow the DWP to calculate top-up benefits such as Tax Credits and the new Universal Credit.
The wages for employees aged under 16 are not required to be included in the RTI report, unless those wages are so high that the worker will be subject to income tax. Workers aged under 16 do not pay NICs, and are not eligible to claim Tax Credits.
Penalties for errors
The draft legislation released on 11 December 2012 indicates that penalties for errors in RTI reports will apply from 6 April 2013, when most employers will be required to start using RTI. Those employers who are already in the RTI pilot programme may be subject to penalties if their last RTI report for the 2012/13 tax year is incorrect.
In either case the penalties for errors in RTI reports will not be collected until the 2013 Finance Act has been passed, probably in late July 2013. This application of penalties from the start of RTI has come as an unpleasant surprise, because tax and accountancy bodies have been pushing for a 'soft-landing' for the RTI penalty rules for all employers.
Penalties for late reports
Penalties for RTI reports which are submitted late will generally apply from 6 April 2014 onwards. Remember an RTI report will have to be filed every time employees are paid. Under the current system a report of PAYE deductions is only required to be submitted to HMRC once per tax year, by 19 May after the end of the tax year.
Where the last RTI report for the tax years 2012/13 (for employers in the RTI pilot) or 2013/14 is submitted by 19 May after the end of the tax year, there will be no late-filing penalty. However, from 6 April 2014, where the employer fails to submit RTI reports on time within the tax year, the employer could be fined for each month for which RTI reports are late. Only one penalty per month will apply even if the employer makes more than one RTI report during the month.
What to report
RTI reports will need to be made where at least one employee is paid above the lower earnings limit (LEL), (£109 per week for 2013/14). For wages between the LEL and the Primary threshold (£149 per week for 2013/14) the worker is given NI credits although they don't actually pay any NI, so the level of their wages needs to be reported.
A major difference between RTI and the current system, is that once the employer is reporting under RTI, reports must be made for each employee even if no tax or NI are deducted for a particular period. This because RTI has two functions; - to report deductions to HMRC and to report net pay for each worker to the Department of Work and Pensions (DWP) to allow the DWP to calculate top-up benefits such as Tax Credits and the new Universal Credit.
The wages for employees aged under 16 are not required to be included in the RTI report, unless those wages are so high that the worker will be subject to income tax. Workers aged under 16 do not pay NICs, and are not eligible to claim Tax Credits.
Penalties for errors
The draft legislation released on 11 December 2012 indicates that penalties for errors in RTI reports will apply from 6 April 2013, when most employers will be required to start using RTI. Those employers who are already in the RTI pilot programme may be subject to penalties if their last RTI report for the 2012/13 tax year is incorrect.
In either case the penalties for errors in RTI reports will not be collected until the 2013 Finance Act has been passed, probably in late July 2013. This application of penalties from the start of RTI has come as an unpleasant surprise, because tax and accountancy bodies have been pushing for a 'soft-landing' for the RTI penalty rules for all employers.
Penalties for late reports
Penalties for RTI reports which are submitted late will generally apply from 6 April 2014 onwards. Remember an RTI report will have to be filed every time employees are paid. Under the current system a report of PAYE deductions is only required to be submitted to HMRC once per tax year, by 19 May after the end of the tax year.
Where the last RTI report for the tax years 2012/13 (for employers in the RTI pilot) or 2013/14 is submitted by 19 May after the end of the tax year, there will be no late-filing penalty. However, from 6 April 2014, where the employer fails to submit RTI reports on time within the tax year, the employer could be fined for each month for which RTI reports are late. Only one penalty per month will apply even if the employer makes more than one RTI report during the month.
Friday, 30 November 2012
Planning for RTI
If you are an employer you should have received information from the Taxman about operating PAYE under Real Time Information (RTI).
Employers with fewer than 5001 employees will have to operate RTI from 6 April 2013, and that includes one-man companies. Some employers have already started to use RTI under the pilot program. Individuals who employ carers in their own home may be able to defer migrating to RTI until April 2014.
Defacto's online portal will be RTI compliant for 2013 however if you use another 3rd party software you need to check whether your payroll software will be RTI-ready from April 2013. Don't assume it will be. Some software providers have taken this time to discontinue legacy packages and force you to move to more expensive offerings. Even HMRC is cutting back on the free payroll software it provides. The HMRC PAYE Basic tools will work under RTI, but only for up to nine employees, and it does not handle net pay arrangements for employer pension contributions.
If you use an external provider to run your payroll, you must talk to them about how much it will cost to run your payroll from April 2013. RTI requires more data to be submitted to the Tax Office than currently required (see below). Also the RTI reports must be sent on or before the day on which employees are paid, which could be daily or weekly. Currently the Taxman requires an annual report of what has been paid and deducted under PAYE.
The 'on or before' requirement has been relaxed in limited circumstances where employees are paid in cash on the day they work, and the amount of payment cannot be known in advance. This may apply to bar staff and crop-pickers. However, the RTI report must still be made within seven days of the day of payment, or when the next payroll is run, whichever comes next.
As the purpose of RTI is to provide accurate information to the DWP on claimants' earnings, employers are required to provide the weekly hours worked by each employee, as they fall into the following bands:
A. Up to 15.99 hours
B. 16 to 24.99 hours
C. 30 hours or more
D. Other
You don't have to record the exact hours worked, only the normal hours the employee is expected to work.
From April 2014 the Taxman will charge penalties where RTI reports are submitted late, or containing inaccurate information. Please talk to us about how your business can meet the RTI challenge and how we can help. You have just four months to get ready.
Employers with fewer than 5001 employees will have to operate RTI from 6 April 2013, and that includes one-man companies. Some employers have already started to use RTI under the pilot program. Individuals who employ carers in their own home may be able to defer migrating to RTI until April 2014.
Defacto's online portal will be RTI compliant for 2013 however if you use another 3rd party software you need to check whether your payroll software will be RTI-ready from April 2013. Don't assume it will be. Some software providers have taken this time to discontinue legacy packages and force you to move to more expensive offerings. Even HMRC is cutting back on the free payroll software it provides. The HMRC PAYE Basic tools will work under RTI, but only for up to nine employees, and it does not handle net pay arrangements for employer pension contributions.
If you use an external provider to run your payroll, you must talk to them about how much it will cost to run your payroll from April 2013. RTI requires more data to be submitted to the Tax Office than currently required (see below). Also the RTI reports must be sent on or before the day on which employees are paid, which could be daily or weekly. Currently the Taxman requires an annual report of what has been paid and deducted under PAYE.
The 'on or before' requirement has been relaxed in limited circumstances where employees are paid in cash on the day they work, and the amount of payment cannot be known in advance. This may apply to bar staff and crop-pickers. However, the RTI report must still be made within seven days of the day of payment, or when the next payroll is run, whichever comes next.
As the purpose of RTI is to provide accurate information to the DWP on claimants' earnings, employers are required to provide the weekly hours worked by each employee, as they fall into the following bands:
A. Up to 15.99 hours
B. 16 to 24.99 hours
C. 30 hours or more
D. Other
You don't have to record the exact hours worked, only the normal hours the employee is expected to work.
From April 2014 the Taxman will charge penalties where RTI reports are submitted late, or containing inaccurate information. Please talk to us about how your business can meet the RTI challenge and how we can help. You have just four months to get ready.
Monday, 1 October 2012
RTI Gathers Pace
We warned you previously about the new real time information (RTI) process. Now the Taxman is writing to all employers who are not already part of an RTI pilot, to tell them how to prepare for RTI.
To recap: RTI is a new way of submitting payroll data to the Tax Office. Instead of sending PAYE information to HMRC once after the end of the tax year, employers must submit their payroll data online on every occasion their employees are paid.
If you run a computerised payroll, your payroll software should be updated to cope with RTI. However, do check with your software provider, as some payroll packages are not going to be revised for RTI. In which case you need to find new payroll software, or use the free software provided by HMRC (for up to 9 employees), or ask us help you process your payroll each month.
All small and medium sized employers will be expected to start using RTI to submit payroll data from April 2013, unless they have agreed a different start date with the Tax Office. Once you receive an 'invitation' from the Taxman to use RTI, you must join the RTI system from the date directed.
You will need to collect some new data items under RTI which are not currently required for PAYE, such as:
- Hours worked per week for each employee based on one of four bands;
- Details of those earning less than the lower earnings limit (£107 per week);
- Which employees are paid irregularly, perhaps only once per year; and
- Passport numbers for employees who do not have NI numbers.
In addition you will need to have the correct NI number (where this exists), date of birth, gender, full name and address for each employee.
We can help you with the transition to RTI, but please start thinking about what help you might need sooner rather than later.
To recap: RTI is a new way of submitting payroll data to the Tax Office. Instead of sending PAYE information to HMRC once after the end of the tax year, employers must submit their payroll data online on every occasion their employees are paid.
If you run a computerised payroll, your payroll software should be updated to cope with RTI. However, do check with your software provider, as some payroll packages are not going to be revised for RTI. In which case you need to find new payroll software, or use the free software provided by HMRC (for up to 9 employees), or ask us help you process your payroll each month.
All small and medium sized employers will be expected to start using RTI to submit payroll data from April 2013, unless they have agreed a different start date with the Tax Office. Once you receive an 'invitation' from the Taxman to use RTI, you must join the RTI system from the date directed.
You will need to collect some new data items under RTI which are not currently required for PAYE, such as:
- Hours worked per week for each employee based on one of four bands;
- Details of those earning less than the lower earnings limit (£107 per week);
- Which employees are paid irregularly, perhaps only once per year; and
- Passport numbers for employees who do not have NI numbers.
In addition you will need to have the correct NI number (where this exists), date of birth, gender, full name and address for each employee.
We can help you with the transition to RTI, but please start thinking about what help you might need sooner rather than later.
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