A Guide to RTI Submissions

RTI Submissions Simplified

RTI Submissions Simplified

The introduction of Real Time Information (RTI submissions) has been the most significant change to the PAYE system in the UK.  While RTI submissions did not change the way PAYE is calculated, it increased the frequency of reporting requirements, obliging all businesses to submit payroll information to HMRC in real time.

Real Time Information was introduced in April 2012, with the Income Tax (Pay As You Earn) Regulations 2003 amended to reflect the reporting of PAYE information in real time.  Prior to the introduction of RTI submissions, companies sent their payroll information to HMRC annually, at the end of the tax year.  The disadvantage of this approach was that, if a mistake had been made (such as the wrong amount of tax deducted from the employee), the employer could not rectify the error until several months later.  One consequence of the lag between processing payroll and the reporting of information to HMRC was that welfare benefits were often calculated on estimated figures, resulting in the wrong amount of benefit being paid.  The intention behind Real Time Information was to eradicate these errors and create a set of circumstances whereby payroll information could be reported and analysed in a timely manner.

Other benefits associated with the introduction of RTI submissions included a simplified process for employers at the end of year, with the retirement of the End of Year Return, and a much more streamlined way of dealing with leavers and new starters.  Real Time Information also reduced the opportunity for error and fraud. In addition, RTI submissions provided the platform for the introduction of Universal Credit, a major government welfare reform programme.

Research completed on behalf of HMRC in 2015 found that overall, employers were positive about the introduction of RTI submissions, reporting that it saved time (especially at the end of the tax year), decreased errors and improved payroll efficiency.  Furthermore, it encouraged some of those surveyed to change their payroll processes, moving from paper to electronic payroll, changing software provider, and moving payroll from weekly to monthly to reduce administrative load.

Under Real Time Information, data about tax and other deductions under the PAYE system is transmitted to HMRC by the employer as the employee is paid. The only notable exception to this occurs when employees are paid earlier than normal due to the pay date falling on a weekend or Holiday, in which case the the submission date would remain consistent with previous pay periods while the actual payment may occour sooner.

Employers using RTI submissions are no longer required to provide information to HMRC using Forms P35 and P14 after the end of the tax year, or to send Forms P45 or P46 to HMRC when employees start or leave a job. Since April 2014, all employers have been required to submit Real Time Information.


RTI submissions and the payroll process

Real Time Information means that the payroll department or external payroll service provider must submit information about tax and other deductions to HMRC every time employees are paid.  Details pertaining to new starters and leavers must also be submitted to HMRC on a timely basis.

Each payroll report is sent to HMRC electronically via a Full Payment Submission (FPS).  This report contains all data pertinent to that pay run, including:

  • Details of each employee, including their name, tax code, and national insurance number
  • Details of all payments made to employees in the pay run
  • Income tax and national insurance (NI) contributions in the pay run
  • Any new starters or leavers in the pay run

Details of any taxable benefits provided to employees (form P11D) also need to be submitted to HMRC (once a year), and staff should be given an annual summary of their earnings and tax paid during that tax year (form P60).

In addition to the FPS is the EPS – the Employer’s Payment Summary.  The EPS comprises information on any costs which the employer had paid and can reclaim from HMRC, including Statutory Maternity Pay, Paternity Pay, Shared Parental Leave Pay, Adoption Pay, the Employer’s Allowance, CIS deductions and the Apprenticeship Levy.  The EPS must also be completed to report nil payments (i.e., where no payroll payment has been made) or where payroll is to be discontinued.

If any errors were found in the previous year’s payroll information, an Earlier Year Update (EYU) can be submitted to correct the data.

In terms of submitting the Real Time Information to HMRC, most payroll software will generate the required reports and complete the RTI submission on the company’s behalf.  However, the reporting is only as good as the data inputted. So while many inhouse payroll teams would be capable of submitting Real Time Information, the understanding of the legislation and eligibility for allowances and reliefs – particularly in relation to the data included on the EPS – needs to be informed by specialist knowledge.  It is in these circumstances that the use of a UK payroll bureau can be very valuable, as their expert knowledge and up-to-date training will ensure that payroll processes run efficiently, and to the company’s maximum benefit.


Late RTI submission Penalties

Penalties for late RTI submissions (FPS) are based on company size, with a fine of £100 for businesses employing 1 – 9 employees, £200 for those employing 10 – 49 employees, £300 for 50 – 249 employees, and £400 for 250+ employees.

Penalties can also be imposed for the failure to submit an EPS where no employees were paid in any given tax month.

However, penalties will not be imposed if the FPS is late but all reported payments on the FPS are within 3 days of the pay run, nor if the delay relates to a new employer (as long as the FPS is sent within 30 days of paying an employee).

Aside from late RTI submissions, penalties can also be imposed for inaccurate reporting, particularly where HMRC discovers careless or deliberate errors.  The fine in these cases will be determined according to the amount of potential lost revenue for HMRC, the circumstances surrounding the inaccuracies, and whether the errors were disclosed voluntarily.

Penalties can be appealed, but fines must be paid within 30 days to avoid being charged interest.


RTI submissions and external payroll service providers

While the process of submitting Real Time Information to HMRC is relatively straightforward, it is not always possible for an inhouse payroll department to stay up-to-date with the most current eligibility criteria and reclaim money for schemes included on the EPS submission, including the Employer’s Allowance and statutory payment claims.  Without regular training and access to specialist knowledge, resources, and payroll software, it is easy to lose touch with current criteria, thereby failing to make the most of the tax efficiencies available.  It is in cases like these where the use of an external payroll services company like Paycheck Plus is highly beneficial.  Our experienced, knowledgeable team will ensure that the Real Time Information submitted to HMRC on your behalf is accurate and includes claims for all the allowances and reliefs that you are eligible for, giving you peace of mind that you are compliant, and minimising the risk of financial penalties due to incorrect RTI submissions.


How can an outsourced UK payroll company help?

As a specialist outsourced UK payroll company, Paycheck Plus can advise you on the IR35 legislation, and guide your organisation through the status determination process.  Our UK outsourced payroll service can help you to mitigate your risk of invalid status determination, thereby ensuring you are not liable for unpaid taxes or fines for late payment.  Should we identify any contractors who are no longer eligible for off-payroll treatment, our UK payroll company can help to calculate and process their payroll data, auto enrolment and exemptions, as well as issuing payslips and completing any end of year administration.  If your employees require assistance managing childcare vouchers, SMP, SSP, student loans, taxation of benefits and other payroll elements unique to the UK, our UK payroll company experts are on hand to provide support and to guide you through your responsibilities as an employer in the UK, ensuring you’re compliant and helping you to avoid financial penalties.

If you would like some help or advice on navigating the IR35 legislation call our payroll company on (0)1 905 9400 or request a callback today. Our award-winning team of global payroll providers keep up to date with ever evolving legislation to deliver employee wages in an accurate timely and compliant manner.