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Are any major changes in payroll issues planned?


7 September 2011

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Question in full:

Question in full:

Are any major changes in payroll issues planned? A commercial software company we purchase from are sending out training information – the implication of this material is that if we don’t get updated soon, we may contravene alterations to legislation.

A: The big change on the horizon is Real Time Information (RTI), which is expected to be fully up and running by October 2013. It is being called the biggest change to PAYE for employers since 1944/45, when PAYE was introduced.

The first system pilots are expected to start in April 2012, with large employers migrated in January 2013, medium employers by April and small employers by October 2013. GP practices should fall into the small employer bracket so will have two years from now to prepare for implementing this.

Under the current system, employers and pension providers send information about tax, National Insurance contributions (NIC) and other payroll deductions to HMRC as a summary after the end of each tax year. This means that any adjustments to an individual’s overall deductions can only be made by the Revenue after the end of the year. Quite often this is not done until the employee contacts HMRC if they think a rebate is due.

RTI is designed to speed up this procedure by using software that will process the information as it is submitted – and therefore in real time. This is intended to make it easier for employers and HMRC but also crucially to support the introduction of universal credits and reduce errors and fraud in tax credits.

Accordingly, under RTI, employers will inform HMRC about tax, NIC and other deductions when or even before the payments are made. This should result in any anomalies arising from multiple appointments or periods out of work being picked up by HMRC at the time – and corrected then – rather than when making repayments or collecting additional tax after the end of the tax year. It will also enable HMRC to make any adjustments to tax credits resulting from a claimant having some employment at that time rather than after the end of the year.

Payroll software will need to be adapted for RTI so that RTI reporting becomes an integral part of your normal payroll activity. When you run your payroll, the payroll software will gather the information required and send it to HMRC. This will be done through the Government Gateway or by using electronic data interchange (EDI) on or before the date the payment is made.

However, HMRC is currently working with the banking and software businesses to develop a system that will enable RTI reporting through Bacs at the time the electronic payments are made to the employees.

Under RTI, employers will no longer need to complete the end-of-year returns, P35, P14 and P38A, as HMRC will already have all the information each time the payroll is run. The new end-of-year procedure will therefore simply be to:

  • Indicate on the last payment submission on or before 
5 April that this is the final submission for the tax year.
  • Provide each employee with a P60.
  • Complete and file any forms P11D and P11D(b) as under the present PAYE arrangements.

GP practices need to be aware of these major changes in the pipeline but there is no need to do anything just yet to prepare for this until the software has been fully tested and piloted. It does, however, mean that if any practices currently use a manual payroll system, they will need to switch to a computerised payroll prior to the introduction of RTI. This will apply to all employers, however small, and even apply to individuals employing a nanny or any other staff.

Full information is available from HMRC: www.hmrc.gov.uk/rti/index.htm

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