Pay Times: RTI Special Edition (Autumn 2012)

PAY TIMES AUTUMN | RTI SPECIAL EDITION 2012 HELPING YOU AS AN EMPLOYER

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Welcome to a special issue of Price Bailey’s Pay Times, produced by our Employer and Payroll Solutions team to help you understand the impact of Real Time Information.

Real Time Information

Are you ready?

In April 2013 HM Revenue & Customs (HMRC) is introducing a new way of reporting PAYE: Real Time Information (RTI).

Why is RTI being introduced?

RTI should ultimately enable simplification of the benefits system as we move towards the introduction of Universal Credit in October 2013.

HMRC believe RTI will make administration easier not only for itself but also for employers and pension providers resulting in more accurate records held for individuals.

Will it affect me?

RTI is one of the biggest reforms of the PAYE system since it was introduced in the 1940s. It will definitely impact your payroll systems and will also require communication with your employees and a review of your internal processes and systems.

How will it affect me?

RTI has implications for businesses, business owners and employees. In April 2013 most businesses will need to be using RTI and by October 2013 it will be compulsory for all businesses. Failure to make the online submissions may result in significant fines. HMRC intends to write to businesses between October 2012 and February 2013 to notify them of RTI and when it will become compulsory.

How will it affect me as: A Business Owner

An Employer

An Employee

Do you draw a salary from your business?

As an employer you will be required to comply with RTI requirements by October 2013 regardless of the size of your workforce or turnover.

Do HMRC know where you live?

If the answer is yes, you will need to comply with the RTI requirements whether you have a regular monthly salary or an annual salary at the end of the year.

HMRC will notify you in writing of your ‘on-boarding date’ which is when it will be compulsory for you to submit your payroll data online via the RTI scheme. Your ‘on-boarding date’ could be as early as April 2013!

There are very limited exceptions when RTI will not apply. These are: 1. If you employ a carer in your home.

2. If you, the partnership or the company are practising members of a religious society or order whose beliefs are incompatible with the use of electronic communications.

Pay Times Autumn RTI Special 2012

Although you may have informed your employer of your current personal details (full name, date of birth, address, National Insurance number, gender etc) it is your responsibility to inform HMRC. If you don’t, your employer may be penalised when making RTI submissions.

What do I need to do to be ready?

RTI requires employers to hold up to 118 individual pieces of information on every employee whether it be personal information or information generated through the payroll process. This information should be up to date, complete and in the correct format for every RTI submission. Employers are required to hold records that include employees’ full names, national insurance number, date of birth, hours worked and other standard information.

As a minimum you should undertake the following tasks to ensure you are ready for RTI: Data Cleansing To ensure your employee records are complete and in the format required by RTI, you will need to undertake a data cleansing process whereby employees confirm that the details you hold are correct and that HMRC hold the same details. We recommend that you review your ‘starter’ and ‘leaver’ forms and HR processes.

It is important to note that only employees are able to amend their information directly with HMRC. If an employee moves house, for example, they will need to contact HMRC and change the information themselves in addition to notifying you as their employer.

Procedural Review and Process Change The introduction of RTI has a number of implications for business systems and processes, including but not limited to:   

An end to payrolls being processed in arrears Advance payments, no matter how small, must be recorded on the payroll at the time of payment RTI submissions for Directors’ annual payrolls must be filed on or before payday

Contract Review We suggest you review your contracts of employment to ensure there is a contractual obligation that employees will provide accurate information, not only at the outset of employment but throughout the employment relationship.

You may also want to consider including breach of the obligation in your disciplinary policy. If changes are made to your systems and processes (e.g. pay is no longer paid in arrears) it may lead to a necessary variation of employment terms. If a variation is required, you should formally consult with your employees.

Systems Review You need to ensure your payroll software is appropriate and up to date. You should contact your provider and ask what changes they will be making to prepare for RTI.

National Minimum Wage (NMW) Rates increase from 1st October 2012, as follows: Adults aged 21 and over Current:...........................................£6.08 To: .....................................................£6.19 18-20 year olds Current:...........................................£4.98 To: ..........................................no change 16-17 year olds Current:...........................................£3.68 To: ...........................................no change Apprentices Current:...........................................£2.60 To: .....................................................£2.65

Agricultural Wages From 1st October 2012 the agricultural minimum rates of pay for grades 1-6 for England and Wales are: Grade 1...........................£6.21 per hour Grade 2...........................£6.96 per hour Grade 3...........................£7.66 per hour Grade 4...........................£8.21 per hour Grade 5...........................£8.70 per hour Grade 6...........................£9.40 per hour

Advisory Fuel Rates Engine size 1400cc or less 1401cc to 2000cc Over 2000cc Engine size 1600cc or less 1601cc to 2000cc Over 2000cc

Petrol 15p 18p 26p

LPG 10p 12p 17p Diesel 12p 15p 18p

Petrol hybrid cars are treated as petrol cars for this purpose.

Pay Times Autumn RTI Special 2012

Can Price Bailey help?

We understand what your business needs to do to prepare for RTI. We are continuously working with a number of our clients during HMRC's pilot of RTI so we are experiencing the system first hand. Our Employer and Payroll Solutions team are able to guide you through the entire process, including: 

Data cleansing: Collecting and updating employee data Our recommendation is that you ensure a process is in place to assist and manage employees' initial and ongoing responsibility to update their personal details not only with you but also with HMRC. We can assist and support you through this process when initially joining RTI and moving forward, for example by providing letter templates to send to your employees and reviewing your ‘starter’ and ‘leaver’ forms.

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Procedural Review and Process Change Due to the likely impact caused by the requirement to make an RTI submission each time a payment is made we can assist by working with you to review your processes to identify where existing practices may conflict with RTI. We can make suggestions for change and help you implement those changes.

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Contract Review We can review your contracts and suggest amendments to assist you to be RTI compliant. If the review leads to the requirement to vary the contracts of employment we can support you when consulting with your employees and introducing the changes.

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Systems Review Should you want to change your software package, we provide Sage software packages, support and training.

Alternatively, rather than upgrading your existing software, you may want to consider outsourcing your payroll to us.

If you are not looking for a complete outsourced solution, our Business Systems team can assist you to review your current payroll software and advise on relevant updates.

RTI Ready Checklist

Contact Us

In order to make sure you are ready for RTI, as a minimum you should ensure:

To talk to someone in our Employer and Payroll Solutions team call +44 (0)1223 565035 or email victoria.pratley@pricebailey.co.uk or caroline.hall@pricebailey.co.uk.

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You have collected all required information from your employees and your payroll records are up to date You have reviewed and varied your standard terms of employment where necessary, and consulted with your employees if changes are required You have informed your employees of the need for them to be responsible for updating their information with HMRC Your payroll software is appropriate and you are using the latest version

HMRC are sending out new information as the pilot progresses. We will be updating our website regularly as we receive this information – visit www.pricebailey.co.uk/rti for updates.

The information contained herein is of a general nature and not intended to address the circumstances of any particular individual or entity. Whilst we have made an effort to provide accurate and up to date information, it is recommended that you consult us before taking or refraining from taking action based on matters discussed. Price Bailey is a member of the UK200Group and IAPA, associations of separately owned and independently managed accountancy, legal and business advisory firms. For more information about the Price Bailey Group and regulatory details please visit www.pricebailey.co.uk/legal

Pay Times Autumn RTI Special 2012

© Price Bailey, Oct 2012