Mitchell Charlesworth warns SMEs to prepare for ‘massive changes’ to payroll…
Mitchell Charlesworth accountants which has offices in Liverpool, Manchester, Chester, Warrington and Widnes said Real Time Information (RTI) is being introduced by HMRC on April 6 2013 to improve the operation of Pay As You Earn (PAYE). PAYE is the method by which income tax and national insurance is deducted from employees’ wages before they are paid.
Mitchell Charlesworth payroll manager Joanne Nieman (pictured) said under the current system employers submit PAYE information to HMRC each May using an electronic version of forms P35 and P14. However, the new RTI system will require firms to send this payroll data to the HMRC online, via the Government Gateway, on or before the date each employee is paid.
“It is vital firms ensure their systems are ready for RTI,” she said. “This is a fundamental change that will particularly affect cash flow. RTI gives HMRC precise data meaning the taxman will know exactly how much is owed by firms and when it is due to be paid. So if a business does not pay the correct amount promptly they will be liable to a penalty. In the past some firms will have underpaid their PAYE to help ease cashflow perhaps paying in lump sums over a year. This will no longer be possible without incurring a penalty.”
Mrs Nieman said penalties will also be enforced from April 2013 if firms supply inaccurate data including the dates of births and names and addresses of employees on the payroll.
“We are advising our clients to get ahead of the game and start checking their employees’ personal data before RTI is live to help correct any inaccurate or incomplete records,” she said. “If you are in any doubt about whether your payroll systems are correct and ready for RTI we urge you to take specialist advice.”
Mrs Nieman urged firms to ‘play safe’ and act now to prevent problems with RTI and pointed to a recent Federation of Small Business (FSB) survey of 1,700 members which showed a quarter did not know about the RTI changes and only 16pc were prepared.
“We believe RTI could be particularly problematic for property and construction firms,” she said. “These types of businesses often engage sub-contractors who have tax deducted under special Construction Industry Scheme rules but they too will have to make prompt payment to HMRC to avoid penalties. Furthermore pubs, restaurants or any business employing casual workers will have to submit data under RTI even if they have not deducted any tax. Under RTI it is essential that firms have the correct details for these employees.”
Mrs Nieman added that under the latest HMRC guidance penalties for the late submission of RTI data, known as the Full Payment Submission (FPS), will not begin until April 2014. However, the current penalty regime will continue to apply at the year end, with a penalty issued if the relevant P35 and P14 information is not filed by 19 May 2013.
Mitchell Charlesworth is staging a free RTI seminar entitled ‘What employers should know’ at its Widnes office on Wednesday February 27 between 8.30am and 10am, To register contact: Cara.Bartlett@mitchellcharlesworth.co.uk Tel: 0151 225 2300.
For more information on the RTI scheme or for payroll advice contact: firstname.lastname@example.org or any member of the Mitchell Charlesworth payroll team in Liverpool: 0151 255 2300 Manchester: 0161 817 6100 Chester: 01244 323051 Warrington: 01925 635141 Widnes: 0151 423 7500.
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Tags: Business Information Portal, Construction Industry Scheme, Federation of Small Business, FPS, FSB, Full Payment Submission, HMRC, income tax, Joanne Nieman, Mitchell Charlesworth, National Insurance, Pay As You Earn, PAYE, payroll, Real Time Information, RTI, SMEs, taxman, The BIP, West Midlands BIP