RSM Tenon: All change for Pay As You Earn – are you ready for Real Time Information?
|
Steve Crompton, Partner at RSM Tenon
|
With effect from April 2013, HM Revenue & Customs (HMRC) is introducing a new way of reporting PAYE, known as Real Time Information, or RTI. The new system introduces significant changes to the way in which employers must report the payments and deductions they have made under PAYE. Under the Pay as You Earn system, employers deduct an appropriate amount of income tax and national insurance contributions (NICs) from employees’ wages in accordance with PAYE codes, tables and other instructions and procedures laid down by HMRC. Over the course of a year, the amounts deducted should be a close match to the actual tax and NIC liability due. Employers deduct the tax and NICs, add their own employer’s NICs, and pay the total to HMRC net of certain adjustments, every month or quarter. However, it is not until the end of the tax year when the annual return is completed, that the overall liability is reviewed and calculated. Under this system, inaccuracies can go undetected for long periods of time, with the result that individuals can go for extended periods inadvertently paying the wrong amount of tax. The aim of RTI is to help to ensure that individuals pay the correct amount of income tax and NICs throughout the year. It will also assist the Department of Work and Pensions in administrating the Universal Credit due to be introduced in October 2013 of which enables them to check the correct amount of credit is being paid to individuals. While some essential aspects of the new system will remain the same, under RTI employers and pension providers must submit information to HMRC regarding deductions they have made for PAYE, NICs and student loans when or before each payment is made, rather than at the end of the year. HMRC also hopes to reduce the administrative burden on businesses. Under RTI, there will no longer be a need to submit forms P14, P35 or P35A, and the PAYE end of year reconciliation process will be simplified. RTI is being phased in from next April, with all micro, small and medium-sized businesses, and most large employers and payroll bureaux set to begin sending payroll information to HMRC in real time from this date. Getting RTI-ready It is essential to prepare for the changes ahead of time in order to ensure that your payroll data is accurate and in an appropriate format for RTI. The information you submit will be matched against records held on HMRC’s database, and any discrepancies could lead to inaccurate tax calculations or trigger a compliance check. Government unveils controversial ‘rights for shares’ scheme The Government has unveiled its plans to introduce new owner-employee contracts, which would allow employers to offer tax-free shares to staff in return for those staff giving up specified employment rights. The scheme offers owner-employees between £2,000 and £50,000 of shares, which are exempt from capital gains tax (CGT). However, in return, employees must give up key rights relating to unfair dismissal, statutory redundancy pay, flexible working and time off for training, and would have to give more notice of an early date of return from maternity or adoption leave. The scheme is intended to offer additional flexibility to small and medium-sized firms, but would be open to all employers. While employee-owner contracts would be optional for existing employees, businesses could choose to offer only this type of contract when taking on new staff. Businesses would also have the option of building more generous employment rights into their contracts, should they wish. However, the plans have been met with some degree of opposition, with experts accusing Chancellor George Osborne of opening up ‘new opportunities’ for tax avoidance. While some business leaders have supported the measure, others have argued that firms could use the scheme to reward highly paid staff with up to £50,000 of tax-exempt shares without them suffering any loss of employment rights, while lower paid staff with a small number of shares may enjoy comparatively few benefits from the scheme. Some business groups have also warned that the move would not be relevant to all firms, and could result in too much additional red tape. Meanwhile, employee representatives have reacted angrily to the announcement, with Citizens Advice branding the plans a ‘rogues’ charter’. The Government has launched a consultation on the scheme, which is set to come into effect by April 2013. For further information please contact Steve Crompton, Partner, Taxation, on +44 (0)7790 840 394 or steve.crompton@rsmtenon.com More articles in
Sectors
CommentsIf you'd like to leave a comment, please register now for free or login
|
