As of April 6th 2013, all employers must report Pay As You Earn (PAYE) in real time, instead of submitting details at the end of each tax year, which runs from April 6th to April 5th. Every time a worker is paid by their employer, the details have to be provided to HMRC using payroll software.
How will employers be affected by Real Time Information (RTI)?
Although an employer will still operate PAYE, they will no longer need to complete and submit forms P14 or P35. These are used to report the end-of-year totals of pay and tax. Information will be sent to HMRC using a Full Payment Submission on or before the date that each payment is made; this will include details of the payment itself, deductions made and starting or leaving dates if appropriate. However, although a P45 doesn’t have to be sent to HMRC when an employee leaves, you still have to provide one to the employee and send the appropriate details to HMRC.
If a business owner has any employees at all – even if it’s just one – a payroll is required. This keeps track of all payments made, as well as deductions. Commercial software is available for those who want to deal with their own payroll. It is, however, important to check that it is compatible with the systems used by HMRC – this can be done on the official website.
Electronic Data Interchange is available for larger employers, so that significant volumes of information can be transferred to HMRC, as long as the employer’s software is compatible.
It is also possible to outsource payroll, although the employer is still responsible for ensuring that PAYE is operated correctly and that information is submitted within the required timescale.
Forms no longer required
End-of-year forms P35 and P14 are no longer needed by employers as all information will be sent in real time. Although a P45, a form which provides the details of pay and deductions from a particular employer, should be given to the employee for their own records, it doesn’t need to be submitted to HMRC. Forms which were used to inform HMRC of new starters at a company – such as the P46 – are no longer required. Form P38(S), which was used for students, is also now invalid, as they will be subject to PAYE through RTI.
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