Spotlight on Real Time Information (RTI)

RTI has been described as “one of the biggest things to hit payroll since the introduction of PAYE” - and that was in 1944.

This is one of my focus areas, so I would like to give you an introduction to the subject. In the future, I'd like to get your opinions and invoke discussions around RTI, but before we get on to those, here is a bit of background.

First of all, on the subject of huge payroll changes, even during my time in payroll (and no, that doesn’t go back anywhere near as far as 1944) there have been some pretty big changes. Here is just a sample:
 
• Contracted-out National Insurance Contributions
• SSP
• SMP (and SAP/SPP)
• Tax Credits payments through payroll
• Student Loan recoveries
• Electronic filing

You’ve probably got your own personal “favourite” to add to the list - let me know in the comments section below. But now RTI is almost upon us and those of us for whom payroll is their life can embark on philosophical debates about which of the items on the list can really claim to have had the biggest impact. A bit like the arguments over whether the current Manchester United team is better than that of 1998/9, 1967/8 or pre-Munich!

Of course, if RTI eventually led onto Centralised Deductions, as might still happen, the debate would be over.
 
 

RTI v Centralised Deductions – the beginnings

The original HMRC plan (as reported by the Daily Telegraph in February 2010) was to introduce Centralised Deductions (CD) and this caused uproar in the world of payroll. Basically, CD would involve moving the responsibility for calculating and deducting tax, National Insurance contributions (NIC) and Student Loan repayments away from employers to the electronic payment system. HMRC had actually been working on plans for CD for several years before the concept became public knowledge.

Once the initial furore had died down and we had a new Government in place, HMRC published a discussion document “Improving the operation of PAYE” on 27th July 2010. This covered two proposals, RTI and CD. The main focus of the consultation that took place between 27th July and 23rd September, was how big a disaster CD would be and not much on the merits of RTI.

Once the spending review in the autumn of 2010 gave the green light for this project to continue, HMRC produced a consultation document on 3rd December 2010 “Improving the operation of Pay As You Earn (PAYE): Collecting Real Time Information”. The consultation closed on 28th February 2011. It was now quite clear that RTI would happen and the consultation was about how not if.

One of the quotes from the consultation document is, “Responses to the discussion paper were supportive of the RTI concept. Ministers have therefore decided to proceed with a phased introduction of RTI beginning in 2012.”

My view is that people only appeared supportive of RTI on the basis that they were mostly vehemently opposed to CD!  For my part, I am very supportive of the principle aims of RTI. What do you think? Let me know how you stand in the comments section below.
 
 

What is RTI?

That’s a good question! At its highest level, RTI fundamentally changes the method, frequency, and content of information that is passed from employer payroll departments to HMRC. The programme for this change is phased with the main aspect of phase 1 of RTI being the requirement for employers to submit periodic (e.g. weekly/monthly dependent on pay frequency) returns of much more information than the current P14/P35s contain at Tax Year End.

There is a pilot which is due to start in April 2012 and all employers must be on RTI by October 2013. Just what happens in the 18 months between these dates seems to be a bit up in the air at the moment.

The fact is that the RTI project and specification is still a work in progress; the 3rd December 2010 consultation paper said that the specification would be published by the end of March 2011 and, once published, would not change. The reality is that the detail of phase 1 of RTI is still being worked on. (I use the expression “phase 1” because what we are all working on at the moment is just the start. Over time, RTI will change significantly, but for the moment we have enough to challenge us with phase 1).
 
 

Submission Channels

Originally, HMRC said there would be two channels available; BACS for those that made net payments via BACS and Internet for those who didn’t. They ran out of time to resolve all the issues with the BACS channel and therefore announced an interim solution until their preferred strategic option (BACS) is ready.
This means that for the Pilot, and up to at least April 2014, both Internet and EDI will be available channels.
However, for those employees paid by BACS, the net payment on the BACS file will need to contain a cross reference to the details submitted in the (internet or EDI) RTI file so the two can be linked to provide a perceived validation of the RTI data.
 
 

For More Information

In the coming months, as the RTI story unfolds, I’ll tell you more on these pages.

But could also consider attending one of the seminars MidlandHR will be holding in November 2011.
More details are available here: RTI Information
 

Thanks for reading,
 

John
 

Posted: 12/09/2011 10:00:00 by MidlandHR | with 0 comments