Regulation update: payroll law changes in 2013

Posted on 3 Apr 2012

From April 2013, a phased introduction of Real Time Information (RTI) will see employers submitting payroll data to HMRC via the centralised registration service for e-Government services in the UK, Government Gateway, on or before payments credit employee’s bank accounts. Ken Davies, director of payroll services at accountancy firm Mitchell Charlesworth explains why the new measures could greatly increase the workload for employers

By October 2013, all employers will have to submit Real Time Information for Payroll. However, due to HMRC roll out strategy employers may find themselves with directives to commence RTI from as early as April 2013.

Currently employers are able to issue PAYE information to HMRC at the Payroll Year End using electronic versions of the traditional forms P35 and P60. The new RTI system will require firms to send all payroll data to HMRC via the Government Gateway on or before the date each employee is paid.

HMRC have also been floating the idea of employers submitting Online Monthly PAYE Statements to confirm their overall PAYE/National Insurance liability for the month. This would be to ensure that tax offsets against statutory payments such as Statutory Maternity Pay and Statutory Sick Pay are taken into account alongside RTI for Payroll. The changes will mean that, come the 19th or 22nd of the month, HMRC will know exactly how much employers owe them.

Paying by BACS

To ensure that payments made to employees match those within the RTI submission, a new system has been devised. For those who pay employees by BACS, a unique cross-reference (hash) will be required to accompany each payment to employees, which will need to be included in the separate RTI submission to HMRC. If payments are made by cash or cheque, then an RTI submission will still be required but without hashes.

As BACS deal with around 96% of all payments in the UK, the hash will enable HMRC to corroborate the payroll data submitted against the payment made to the individual. This corroboration will assist the Department of Work and Pensions (DWP) with administration of Government’s Universal Credit, due to commence October 2013. By providing the DWP with access to the exact details of what earnings, tax and hours of each taxpaying claimant at any given point, the government hopes to reduce the time spent processing claims and prevent the under and over payment of benefits.

How can employers prepare for the changes? There are four points businesses should consider:

  1. Data Cleansing – submit employee data to HMRC before RTI is live so HMRC can advise of incorrect or incomplete data
  2. Improve and Maintain Data Quality – Make sure you obtain dates of birth, use full names and include addresses when employees are entered on your payroll
  3. Speak to your payroll software supplier or payroll provider – Make sure they can deliver on Real Time Information
  4. Banking – Are you able to use a file your payroll software generates to submit to BACS using your banking facility?

Assuming your payroll software is capable of supporting RTI and you are confident with processing payment files generated by your payroll software then you will need to keep an eye out for your On Boarding Date when you are required to file your first submission under RTI.

The effects on employers

There is a lot of merit in what HMRC are trying to achieve but there is a disproportionate level of responsibility being placed on employers in a short space of time.

Employers may need help getting comfortable with how to submit under RTI or how to import a payment file including hashes from their software instead of keying in individual amounts. The advent of RTI will do away with separate processes for starters and Employer Annual Return Forms P35/P14.

HMRC has promised an initital “softly, softly” approach to RTI implementation and applying penalties for non-compliance. Employers should take advantage of this period to gets systems and understanding in place as fines will run up quickly as more On Boarding Dates are issued.