HMRC Relaxes Reporting of Real Time Information (RTI)

Her Majesty’s Revenue & Customs (HMRC) have relaxed the rules on Real Time Information (RTI) reporting that is due to come into effect next month for small businesses with fewer than 50 employees.

Under the new RTI rules, employers must report PAYE information in real time. What this means is that employers must tell HMRC every time they pay an employee and at the time that they pay them.

In addition employers must use payroll software to send the RTI payment payment details electronically.

This replaces the old payroll process of reporting to HMRC when PAYE information would be submitted just once a year at Payroll Year End.

HMRC have touted RTI as way to simplify the PAYE process to make it less of a burden on both the taxman and employers.

Not Everyone Loves RTI

But a number of small businesses, business groups and accountancy firms have called the imminent Real Time Information system a burden on small businesses because they pay their employees weekly, sometimes even more frequently.

As such HMRC have agreed to relax the rules for some small firms.

Until the 5th October 2013, which is six months after the start of the RTI PAYE regime, firms with fewer than 50 employees can file their payroll information with HMRC by the date of their regular payroll run. Employers can not report any later than the end of the tax month (5th).

The Federation of Small Businesses’ national chairman, John Walker, was pleased with the move, saying:

“It is great news that HMRC have listened to our call for the smallest firms to report regularly in line with their main payroll run, but not in real time. It has taken on board the FSB’s concerns about the time constraints and problems.”

HMRC said it will monitor the progress of the six month reprieve so that it can adequately assess the impact of RTI on small businesses.

John Walker added:

“We hope that HMRC make this regular reporting a permanent measure to help the county’s smallest firms when they review the system in the summer.  We look forward to seeing those findings.”

The Forum of Private Business (FPB) also welcomed the move after accusing HMRC of "panic" with the realisation that many small firms were not ready for the new PAYE regime.

Rob Downes of the FPB said:

“This does seem the sensible course of action, because a tax system in meltdown come April is in nobody’s best interest, and no doubt many firms will now be breathing a sigh of relief. It will though now add another layer of confusion around a subject that is already as clear as mud to many SMEs.”

Paul Aplin, chairman of the ICAEW Tax Faculty, who had also been lobbying HMRC, added:

“This is a victory for common sense. The easement gets round the proposed ‘on or before’ rule which would have forced employers who run monthly payrolls but who pay more frequently having to report each payment as it is made or within seven days: they can still report monthly.”

HMRC has published guidance in a PDF, highlighting situations where employers will not have to report RTI information "on or before" the time that they pay their employee.

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