RTI is the future of payroll

By Rashed Khan, Guest Author (For Guest Post See Terms ) If you have employees, then you need to know that HMRC are planning payroll chang...

By Rashed Khan, Guest Author (For Guest Post See Terms)

If you have employees, then you need to know that HMRC are planning payroll changes which will take place in 2013. The major change is the move to real time information, more commonly known as RTI payroll. Use this article as a checklist to find out more and make sure that your payroll software is ready.

Before the digital age, all payroll work was carried out manually. This meant working out standard, overtime, sick and holiday hours and often paying wages in cash or by cheque. When information was required by HMRC, companies needed to send everything by post and follow up any resulting queries over the telephone or in correspondence. Unsurprisingly, this was exceedingly slow and cumbersome for everyone involved.

Since computer systems have become increasingly commonplace, many manual functions have now been computerised and most companies use payroll software to automate their systems. Lots of information can be provided digitally nowadays, including information that goes to HMRC and other government departments. While this has made a significant improvement to payroll efficiency, there are still various systematic time lags which result from HMRC asking for some PAYE information only once a year. This can cause difficulties all round, especially when employees are also in receipt of certain benefits.

In future, HMRC is planning to use real time information, or RTI. This means that from 2013, employers will need to send information digitally to HMRC at around the same time as they pay their staff. This will have a number of benefits. First of all, it will help to improve accurate payments of PAYE. This means that there are less likely to be errors leading to employees underpaying tax and ending up with arrears. It means that any pay related issues can be dealt with much more swiftly which should reduce frustration in the payroll department. Finally, it means that any employee who claims work-related benefits, such as Universal Credit, will be paid the correct amount. This reduces any risk of overpayments made in error which can be stressful for employees and costly for taxpayers.

Some software companies, such as IRIS, are already RTI ready and are working in partnership with HMRC to ensure that there is a smooth changeover to the new system. Many finance departments are already scrutinising their payroll software to check that it is future proofed. This is worth doing so that businesses are prepared for when the changes come into place next year. HMRC are rolling out RTI from April 2013 and they expect that all employers will be using it by October 2013. 
Key changes to be aware of are that employers will need to digitally advise HMRC about any deductions, including tax, national insurance and so on as soon as they happen. There is also a requirement to report the number of regular hours worked per week. Employers will no longer need to send separate forms such as the P.45 or P.46 to HMRC as these will be subsumed within the new online submission system. All online reporting will need to be carried out either through the secure Government Gateway or through an Electronic Data Interchange.

Any company that hasn’t checked whether it is RTI compliant should consider immediately updating their payroll software system to one which has been officially recognised by HMRC.

About the author: Rashed Khan holds an MSc in Software Engineering and enjoys writing on business/technology related topics. Rashed is currently guest posting on behalf of Iris whose payroll software is now RTI payroll complaint.

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RTI is the future of payroll
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http://www.chiprang.com/2012/04/rti-is-future-of-payroll.html
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