The new Real Time Information (RTI) requirements from HMRC have just come into effect, but many businesses owners still have questions about just what the RTI changes mean to them.
So, if you're still unsure about RTI, we thought we'd summarise some of key things you need to know about the new RTI requirements.
1. Businesses must report RTI from 6th April
From 6th April 2013, businesses must report wages, salaries, PAYE and National Insurance using the new Real Time Information (RTI) requirements. Real Time Information must be submitted electronically to HMRC.
2. You now have to report every time you pay someone, not annually
The biggest change that RTI has introduced is how often you report salary payments to HMRC - instead of reporting once a year, you must now report online every time you pay an employee, either at the time you pay or before. That means if you run a monthly payroll, you’ll report Real Time Information each month to HMRC. You can file your report using HMRC’s Basic PAYE Tools Software, or with a third-party provider like FreeAgent.
3. HMRC have temporarily relaxed the rules for some businesses who pay weekly, or more frequently than monthly
For many small businesses who pay more frequently than monthly, but prepare payslips on a monthly basis - for example, a caterer that employs casual staff - the requirement to report a payment either at the time of payment or before can be a big headache.
Luckily, HMRC have recognised this problem and have extended a temporary reprieve: until 5 October 2013, employers with fewer than 50 employees who prepare monthly payslips, but pay their staff more frequently than monthly, may send information to HMRC by the date of their regular monthly payroll run but no later than the end of the tax month (the 5th of the month).
HMRC are also looking into ways to improve their reporting requirements for these businesses, so fingers crossed!
4. RTI can apply to one-person companies
If you’re the director of a limited company with only yourself as an employee, and the company pays you a salary above the National Insurance Lower Earnings Limit (LEL, or £109/week), RTI will still apply to you. If the company doesn’t pay you a salary at all, but still has a PAYE scheme because, for example, it reimburses you for expenses which you report on form P11D, RTI will also still apply to you. For the months - or years if you have an annual PAYE scheme - when you are not paid a salary, you will need to file “nil” RTI returns reporting no salary with HMRC.
If you are a sole trader (or in a partnership) without any employees, don’t worry - RTI won’t apply to you.
5. If RTI applies to any of your staff, it applies to all of your staff
If you currently only employ casual employees who are paid below the National Insurance Lower Earnings Limit of £109/week, who don’t receive any expense payments, who don’t receive any health benefits and who don’t require any PAYE deductions, that could mean that RTI doesn’t apply to those employees.
However, if any of your company’s employees meet these criteria, including limited company directors, that means that salary payments to all employees must be reported under RTI. So even if you are the director of a limited company and only employ casual staff, if the company must report under RTI for yourself, it must also report it for your other employees.
Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.