COLUMN: Tim Mallon - More taxing times for employers

A HUGE change to PAYE returns which will affect all employers is coming into force in less than six months’ time.

A HUGE change to PAYE returns which will affect all employers is coming into force in less than six months’ time.

From April 2013, employers will have to send PAYE data electronically to HMRC ‘on or before’ payments are made to employees, whether that is monthly, weekly or at the end of a shift for some casual workers. The real time information (RTI) means that PAYE information, including details of all employees’ pay, tax and deductions, will be part of your routine payroll process rather than an end of year return to HMRC.

This marks the end of an almost 70-year-old system which has allowed employers to effectively have a year’s interest free loan from HMRC. Businesses only caught up with PAYE liabilities at the end of the financial year.

The changes to the new system will be felt most keenly by employers of irregularly paid staff – those who are paid at the end of a shift, for example. The employers will have to provide detailed information – up to a possible 108 items per employee – to HMRC online, ‘on or before’ the employee is paid. If that is on a Sunday problems could arise if payroll staff also have to work over weekends to complete the RTI.

Many employers will be required to comply with RTI from April 2013, and all employers will have to do so by October 2013. The changes are all in preparation for universal tax credits as part of the new benefit system.

Red tape for employers will increase as returns have to be completed perhaps 12 times per year (for monthly-paid employees) or 52 times per year for weekly paid instead of once, annually. Measures that employers will have to take include ‘cleaning data’ so that employee facts such as name, address and national insurance number are correct, enabling HMRC to match records and account for the correct amounts.

Penalties are expected to be imposed from April 2014, and given the radical changes to the system, the incidence of penalties is likely to be high. Employers should talk to their advisers to familiarise themselves with the new system before it becomes compulsory.

:: Tim Mallon is tax partner at Ryecroft Glenton and chairman of the North East England branch of the Chartered Institute of Taxation


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