As of 6 April 2013, Employers will have to report to HMRC in a different way. This will affect all employee wages that are subject to the PAYE system.
The PAYE Scheme is the process by which all tax and national insurance is deducted from an employee’s wages each month. Whilst the system itself will not be seeing much change, the method by which these figures are reported to HMRC will be. The aims of the changes are to irradiate fraud and errors in payments being made.
Real Time Information (RTI) will come into force from April 2013 as a method of reporting figures online direct to HMRC on a monthly or weekly basis, depending on the frequency upon which you pay your employees. This information then cross references against the National Insurance and PAYE Services (NPS) records and if there are any irregularities, tax payment will be adjusted accordingly.
Employers will need to make sure that they have an appropriate system upon which the reports can be formulated. If you have less than 9 employees then you can download a basic software package for free from the HMRC website www.hmrc.gov.uk/rti
In order to prepare for the change, Employers should check that they have all the correct data in regards to their employees, most importantly:
- Full names, including middle name and double barrelled names. Shortened names will not be acceptable.
- Correct Date of Birth
- Correct National Insurance Numbers
- Correct Addresses
- Correct Tax Codes – Make sure employees inform you if their tax codes have changed.
- Correct Payroll ID Numbers
- Correct Employment Start date
Make sure all this information has been collated and is easily accessible should it be required.
There are four different types of report submission:
1. Full Payment Submission (FPS): This is the most common type of reporting that the majority of business will use. This is a report which is submitted each time employees are paid. HMRC will then calculate how much tax and NI the Employer will owe each month. Submissions must be made on or before the date that you pay the employee, they cannot be submitted after.
2. Employer Alignment Submission (EAS): One of submissions used for large businesses with over 250 employees. This will need to be submitted at the beginning of the reporting period and then at intervals dictated by HMRC. This will serve to cross reference data to check for irregularities.
3. Employer Payment Summary (EPS): This should only be submitted when you need to advise HMRC of alternations to your payments, i.e. if someone’s leave, or if you are looking reclaim statutory payments made such as SSP or SMP. Details to rebate will need to be submitted to HMRC and should be made before the relevant month or quarter that the liability will be altered.
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4. National Insurance Verification Request (NVR): Only required if you need to verify a national insurance number or to request a number if a member of staff does not have one. This will only need to be done when necessary.
It is advisable to look on the HMRC website for more information and to check your current system will be sufficient for the changes ahead. They also provide a handy checklist for employers so you can make sure you are ready to report.