From 6 April 2013 employers will have to start reporting PAYE information to HMRC in real time. This is referred to as Real Time Information – or RTI.
Lin Homer, the Chief Executive of HMRC, said:
“RTI delivers on all fronts. Business costs will be cut by £300 million a year, employees will be taxed more accurately and fraud and error in the tax credit system will be reduced by hundreds of millions of pounds every year.”
If you have 9 employees or less you will be able to use Basic PAYE Tools to comply with RTI for larger business you will need to purchase a payroll system or use a bureau.
Basic PAYE Tools will:
- record your employees’ details
- handle mid-year tax code changes
- work out and record your employee’s pay, tax, NICs and any Student Loan deductions every payday
- generate the payroll data that you need to send to HMRC in real time, including starter and leaver information
- produce an Employer payment record that works out how much you need to pay HMRC
- contain integrated calculators to help you to work out statutory payments such as Statutory Sick Pay and Statutory Maternity Pay
- transfer employee details from one year to the next so you don’t have to re-enter their details
Basic PAYE Tools does not provide a payslip so here is a template you can use.
A key feature of RTI is to link RTI data and payment information together where employees are paid by direct Bacs. This will reduce errors and improve accuracy, particularly when Universal Credits is introduced. Employers need to use employee bank details to generate the hash cross reference. HMRC appreciate that this may result in a change to business processes for some employers.
The payroll and payment will be linked with a hash created by your payroll solution which contains:
A four character random string which is inserted in field 7 of the Bacs payment record• The sort code of the originator’s bank (6 digits);• The sort code of the recipient’s bank (6 digits)• The amount of payment in pence (-Tax and NI) (11 digits).
This will be sent alongside the tax information to HMRC.
Currently the use of the Hash Cross Reference only applies if you use Direct Bacs
The High Street Banks have not enabled Hash Tags for online banking yet, although this may well change at a later date.
See further discussion on Hash Tags on www.accountingweb.co.uk
4 thoughts on “How small companies can comply with RTI for Free”
Thanks for a good article Steve, very informative and a much under publicised subject.
Lin Homers comment seems to lead towards a complete finance solution for the country!!!
Reblogged this on Cash-Flow from Credit Control.
Thank you for re-blogging