Under the new guidelines employers will no longer be able to submit records to HMRC at the end of the financial year. Starting from April, data will have to be reported on or before each payroll run (be that weekly, fortnightly or monthly).
According to HMRC, the overall aims of RTI are to reduce burdens on employers, improve tax and benefit administration and improve the overall taxpayer and employer experience. There are some risks SMEs may be faced with in moving to reporting in real time. However, there are a number of steps which can be taken to reduce this risk and help businesses prepare for the change.
If you are currently running your payroll in-house, you will need to ensure that you fully understand the legislation and the new processes. For example there are four new processes that need to be implemented by employers when reporting information in real time; Employee Alignment Submission, Full Payment Submission, Employer Payment Submission and National Insurance Verification Request.
Another issue currently being faced by employers across the country is whether or not their payroll software supplier will be prepared for RTI. A number of suppliers have announced that some of their products will not be compliant with the new legislation by April (Sage announced they were to retire their TAS software due to this issue). Certain smaller companies have even ceased trading due to the fact that they cannot cope with the transition to RTI (Payexcel have ceased trading after 10 years because of this).
Companies who outsource their payroll will also be affected with the implementation of RTI; one of the biggest challenges will be a potential increase in outsourcing prices. A survey conducted last year by IRIS found that almost two thirds of business process outsourcing (BPO) providers (62%) said they were planning to increase fees due to the added work RTI would involve. 36% of respondents view the legislation as a "headache" with another 29% seeing it as "unnecessary red tape". The amount of planned price increases varied, with some firms only planning increases of 2-5%, while others were intending to raise their fees by up to 100%. If your business does outsource its payroll, it is important to speak to your BPO as soon as possible and find out if they are planning to increase their prices. If they are, it could be a good idea to see if you could save money by running your own payroll in-house.
HMRC made an announcement recently about easing RTI requirements for small businesses; however this has caused some confusion. Most businesses will still have to report payroll records to HMRC each time they pay employees. The only exception to the rule is businesses with fewer than 50 employees who run payroll monthly, but pay some employees weekly or more frequently. In this situation the employer will be allowed to report RTI monthly when they run their payroll, rather than each time they pay employees. However, this exception is only running until 5th October after which these smaller employers will also have to begin complying fully with RTI.
Regardless of the size of your organisation and whether you run your payroll in-house or outsource it, RTI will still have an effect on you, so it is vital that you understand the legislation and have compliant software. HMRC contacted employers in October and again in February, urging them to start preparing for the imminent transition.
If organisations have undertaken training to educate themselves on the legislation, ensured they have RTI compliant software in place and have properly cleansed their data prior to the transition date, RTI should not be a cause for concern.
Mark Paraskeva, CEO SME Division, IRIS Software Group
Click here to read HR magazine's essential guide to everything you need to know about RTI changes to payroll
