From April 2013, the way business report PAYE deductions is set to change with the implementation of the Real Time Information (RTI) scheme via which employers will communicate payroll data to HMRC before or after payments are made, rather than at the end of the tax year.
In one of the biggest shake-ups in the PAYE system in over half a century, HMRC aims to provide benefits to both itself and employers by providing a more efficient system. The RTI system will replace the current employer annual return (P35 and P14) by collecting data from employers each time they pay an employee.
It is hoped that this will reduce the number of mistakes made (as they can be more efficiently rectified during rather than at the end of the tax year), and make efficiency savings for HMRC.
Small businesses that operate a PAYE scheme (this does not apply to the self employed, only businesses with employees) have been urged to prepare in advance for the implementation of RTI, which starts in April 2013, and will be fully operational by October 2013.
In order to communicate PAYE payments data to HMRC, you can use HMRC’s Basic PAYE Tools package (which will be upgraded in time for the implementation date), or a commercial accounting package. Most widely available accounting software will be upgraded to comply with RTI, but you should check in advance that your chosen provider is going to put the required changes in place.
You can access HMRC’s RTI advice pages here.