Have you heard of RTI?

Whether you love HMRC or loathe them, you can’t argue with the taxman’s determined efforts to modernise their services. Last year HMRC moved all VAT filing online, and this year - in what has been described as ‘the biggest change to payroll since the introduction of PAYE in 1944’ - they are pushing forwards with the introduction of Real Time Information, or RTI.

In simple terms RTI means companies will have to file payroll, tax and National Insurance information about their employees every time they pay them, instead of once every tax year. Of course, in practical terms, the changes are far greater.

Old school accounting software providers, for whom the predictable cycle of the financial year is sacrosanct, have been thrown into turmoil by the concept of “real time” data, and many have had to abandon their current payroll packages are rebuild them from scratch, rather than just issue an update as they do when rates change.

For businesses this means an ordinarily routine software upgrade can become a potentially expensive purchase of a new suite, plus the cost of training bookkeeping and accounting staff on the new software.

Those who use outsourced bookkeeping services should see these costs mitigated somewhat as bookkeepers will be able to spread the cost across their client base - however a recent survey showed that a massive two thirds of accountancy firms would be hiking their rates to recoup the costs they will incur when RTI comes into force.

RTI is launching (with optional fanfare) in early April to coincide with the beginning of the new tax year. Although it promises to be burdensome in the short term, it’s not all bad news. Once the dust has settled employee payroll should be a more automated affair, and a few tax forms (P35s and P14s specifically) will be quietly retired.

It is vital your business is prepared for RTI, as non compliant businesses are in line for a slap on the wrist from HMRC (although actually monetary penalties have been delayed until 2014/15). It’s also important to remember that the introduction of this new scheme does not change reporting requirements for the 2012/13 tax year - all payroll information must still be filed, same as it has always been!

Andy Paterson
Crunch Accounting

andy.paterson@crunch.co.uk
web: www.crunch.co.uk
twi: @teamcrunch
tel: +44 (0) 844 500 8000

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