Real Time Information in PAYE. The Implications

Collecting PAYE information “as it happens” is designed to make the tax system more efficient.  But who is doing the work?

Following a consultation process started in 2010 HMRC have confirmed that plans to pilot and implement Real Time Information (RTI) in the PAYE system are now being implemented, with a target of 2013 to get all employers enrolled.

What is RTI?
RTI is a programme to collect payroll related information and administer payments each time employers run their payroll, rather than wait until the end of the tax year. 

The objectives are, from HMRC’s perspective, to:

  • Make PAYE simpler and more efficient for both themselves and employers.
  • Reduce late payment and fraud
  • Support more accurate payments of Universal Credits

There are some upsides for employers because various pieces of paperwork: P35,P14 and P38As will no longer be required and the  employee starting and leaving process will be easier.  However HMRC is also suggesting that RTI will be less of a burden in general to employees because “reporting will become an integral part of an employer’s payroll activity”.

Impact on Small Business
For small and medium sized businesses Lewis Smith & Co’s advice is not to let these soothing words lull you into a false sense of security.  The process of making RTI integral to a business’s payroll activity may be straight forward when you have a payroll department, some friendly IT people and some process consultants on hand. 

When those resources aren’t available then getting your processes and systems ready to meet the demands of RTI and then maintaining your reporting activity at the required levels of timeliness and accuracy is going to take a lot of work.

You will almost certainly need to bring in an accounting software package (or upgrade the one you have got) in order to be able to generate the right information sufficiently quickly to submit it on-line to HMRC.  Then you will need to set up procedures to make sure relevant information such as overtime, NI alterations for items like Statutory Sick Pay, or adjustments for Student Loans is collected and entered appropriately to meet the deadlines. 

In the new scheme late filing can be tracked very easily and penalties will be incurred very quickly.  In addition compliance with data standards will be under close scrutiny.  You will need to cleanse existing data and make sure that that gaps or inaccuracies are dealt with as employees come and go.  Otherwise, no doubt, you will also become liable for penalties.

At Lewis Smith & Co. we are already working hard at making sure our own payroll bureau will be able to cope with RTI.  We are also developing procedures to ensure clients can make use of the bureau with the minimum of fuss.

So if you want to talk to someone who understands the implications of RTI for small businesses and has some solutions available to the problems it will cause, give Lewis Smith & Co. a call on 01384 235549 or email us on today.


Lewis Smith & Co. – Accountants for Halesowen businesses.