Since last April all employers have been required to submit Real Time Information (RTI) to HMRC every time they pay their employees. However, it's from now (October in fact) that businesses must be more heedful.
This is especially so for companies with 50 employees or more (or those who joined the pilot scheme). They are subject to penalties for incorrect submission and late filing. Employers with fewer than 50 employees have a little longer grace period. Only from next April will they be subject to penalties for errors and late filing. The main change for companies has been that employers must send information to HMRC (Full Payment Submission) about employees’ pay and deductions ahead of them receiving their wage or salary. It may seem extra work at the time. But also it means the laborious year-end process of submitting P14s for all employees, and a P35 summary and employer declaration, is no longer required.
Although HMRC gave businesses a six month grace period to get to grips with this new process and familiarise themselves with the system, it could, without professional help from their accountants, have been tricky for many business owners. Even up to last April when RTI came into force, according to the Federation of Small Businesses, a staggering 25% of SMEs were still unsure about what RTI is and how to do it. Now, from October, 100% of larger businesses need to be vigilant in submitting correct, real-time information on time to avoid fines and penalties. And these will escalate for repeat offenders.
So, what does it really mean for businesses, long term? More time consuming extra work? Or is it of greater benefit to the employer? At Clarand we think it’s a mix.
Employers will not need to send new starter forms P45 or P46 to HMRC or prepare the necessary year-end returns. This, as we say, will ease the headache of submitting the correct details from the whole year, and ultimately give them time back for their business.
Fundamentally, though, employers must understand they need to keep on top of employees’ details on a monthly (or even weekly) basis. Also, they must have a new employee’s full details before their first pay date, even if that employee is a temporary member of staff.
As with all new systems, there are bound to be teething problems which could create difficulty for time-poor business owners struggling to run their business, let alone learn (and remember) a new way of reporting payroll.
Although smaller businesses aren't subjected to the penalties yet, we'd recommend all businesses with payroll to ensure they're adhering to HMRC's guidelines, and submitting the FPS (Full Payment Submissions) correctly, and promptly.
Businesses liable to feel the pressure most are those which pay staff weekly with fluctuating wages, and those with a transient workforce.
Many business owners anticipate that using an accountant to prepare their payroll would be expensive. But bear in mind: most charge a reasonable fee given the penalties the owners could incur by getting it wrong.
Whatever your business, remember: This is one of the biggest changes to payroll since the 1940s. So never be scared to ask for help to take that extra burden away and ensure peace of mind in these changing times. Armed with extra knowledge and support, you can be sure that by your year-end, you can relax knowing you have RTI, and your business, covered.
Claire Priestley writes from Clarand Accountants at Hexham.