Hundreds of thousands of companies have so far failed to report Real Time Information (RTI) to HMRC. HMRC say that 300,000 schemes have not made the switch to RTI as at 5th June. As a result those companies have been sent letters informing them of their legal requirement to have filed PAYE in real time from April 2013 and that they must start reporting now to avoid penalties in future. The majority of these 300,000 employers may not have any employees, but if the PAYE scheme is no longer needed employers should contact HMRC so they can close their records. If you want to keep your PAYE scheme open but you have not paid anyone at all, you still need to report this to HMRC using RTI and if no PAYE/NIC payment is due, you need to inform HMRC of that too. For help on getting started, go to hmrc.gov.uk/act now. Automatic late filing penalties will apply in 2014-15.
Wrong Payroll Dates for RTI?
Now that RTI is in it’s third month since going live, the reporting of PAYE in real time has highlighted to HMRC that some employers are not operating PAYE correctly. Employers must ensure that PAYE is calculated and reported according to their actual payment date: NOT the date the payroll is run and NOT the period end date the work was done by your employees. For example, if a monthly payroll is processed on 5th June for work period ending 31st May, but paid on 10th June, the full payment submission should give the payment date as 10th June, which falls in the tax month running 6th June to 5th July (i.e. tax month 3).
One effect of misaligning is that deductions of tax and NIC from a payment made to an employee may be attributed to the wrong tax month and possibly even a wrong tax year. To address the issues HMRC have published guidance, which can be found here. This sets out steps to be taken and provides guidance in circumstances where an employer decides to change the date employees are paid in order to eliminate the misalignment.
Budget News
Personal Allowances
The latest budget has confirmed that the basic personal allowance will be increased from the current £8,105 to £9,440 for 2013/14. The Coalition Government plan to ultimately raise the allowance to £10,000 from 2014/15. The additional tax rate of 50% is reduced to 45% for 2013/14 for taxable income over £150,000.
National Insurance Employment Allowance
The Government will introduce an allowance of £2000 per year for all businesses and charities to be offset against their Class 1NIC liability from April 2014. The allowance will be claimed as part of the normal payroll process through RTI (Real Time Information)
New Scheme for tax free Childcare
New tax incentives for childcare have been announced. To be eligible, families will have to have all parents in work, with each earning less than £150,000 a year, and not already receiving support through Tax Credits or Universal Credit. The relief will be 20% of the childcare costs up to a total of £6,000 per child per year. The scheme will therefore be worth a maximum of £1,200 per child. The scheme will be phased in from autumn 2015. The current system of employer childcare will continue to be available for current members or they can switch to the new scheme.
Tax Year End Procedure 2013
The end of another tax year is approaching. This is a busy time for payrollers and there are numerous payment and reporting deadlines to be met if penalties are to be avoided. It is vital that employers and their agents understand what needs to be done and when, and that they have all the required information to hand so that the process can be handled smoothly and efficiently. I advise all employers to start their year end preparations early March with the following checklist:
New Starters and RTI
With RTI imminent, the way employers report new starter information to HMRC will change. You will no longer submit P45s or P46s as all starter information will be reported on the first Full Payment Submission (FPS) for those employees. Previously, a new starter would provide their new employer with either a P45 or a P46 if they did not have a P45. With RTI, even if your new employee provides you with a P45, you still need to ask them certain P46 like questions to determine what tax code to use, depending on when they left their previous employer and their start date with you. HMRC have now provided an optional Starter Checklist form which can be downloaded from the HMRC website you may find helpful. This form, which RTI employers can use in lieu of form P46, is also intended to be used alongside a P45. This is a massive change to previous procedures and may take some time getting used to!
Click here for more information from the HMRC website on new starters for RTI.