This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
More than 1.4 million employer PAYE schemes are now reporting to HMRC in real time since the launch of new tax reporting requirements in April.
This means that more than 83% of small to medium firms and more than 1 million (77%) micro employers have already started to report PAYE in real time, and that information about 44.5 million payments made to employees between 6 April and 5 May was successfully reported online to HMRC.
After listening to stakeholders, HMRC has today announced that it will be seeking to extend the temporary relaxation of the new reporting rules for businesses with fewer than 50 employees from October 2013 until April 2014, and that this relaxation will come to an end at this point. The extension means that businesses will not be required to change their approach halfway through the tax year.
The relaxation has meant that these businesses are still required to report through the new system, but are able to do so once a month, rather than each time they pay their employees. This gives small businesses that pay weekly (or more frequently), but who only run their payroll at the end of the month, some extra time to adjust to the new requirements.
From April 2014, all employers need to plan to be reporting in real time, but HMRC is continuing to work with businesses over the coming months to identify whether there are any specific circumstances with on-or-before reporting that it needs to cater for in the longer term.
PAYE information reported in real time is already being used by the Department for Work and Pensions (DWP) to calculate Universal Credit amounts paid to people in its pathfinder pilot in the north west of England, ensuring the amount of benefit accurately reflects their level of income.
Exchequer Secretary to the Treasury David Gauke said:
This is the biggest reform of PAYE since its introduction nearly 70 years ago and we are bringing the system into the 21st century. The transition is going well, and the vast majority of employers are now reporting their PAYE information in real time, meaning that HMRC’s records are becoming more accurate and up-to-date. DWP is already using the new system to underpin its Universal Credit pilot, helping it to be more responsive to changes in claimants’ income levels. This is all good news, but we will continue to listen to and work with businesses to ensure that all employers are reporting in real time by April 2014.
HMRC’s Director General for Personal Tax, Ruth Owen, said:
The roll-out continues to exceed our expectations. I am delighted that 83% of SMEs and 77% of the smallest businesses are already on board. We will now write to the minority of employers who are not, to establish how we can help them meet the requirements of reporting in real time.
Real Time Information (RTI) represents the biggest change to the payroll system in over 60 years. It is designed to reflect the labour market fluidity of the 21st century and deliver improved accuracy to employers and employees. RTI means employers and pension providers report deductions and payments they make to HMRC at the time they are made, rather after the end of the tax year, as at present. This enables the tax system to better ensure the right tax is being taken at source.
Around 44.5 million payments to employees were reported in the tax month from 6 April to 5 May. Of these:
- 83% were reported on or before the payment was made
- a further 12% were reported within six days of the payment, which was agreed as a reasonable time for reporting for those who faced practical difficulties in reporting in real time
The RTI pilot was launched in April 2012 with just 10 employers and, by the end of the pilot on 5 April 2013, over 6 million individual records were being reported in real time.
For most large employers, HMRC has specified a start date between July and September 2013.
HMRC announced in March 2013 that employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run, but no later than the end of the tax month (5th). This temporary relaxation was due to run until 5 October 2013.
HMRC is continuing to work with businesses to identify whether there are any unusual circumstances it needs to cater for in the longer term. But all employers need to plan to be reporting in real time from April 2014.