New Real Time PAYE Reporting

DOCTORS PRACTICES NEED TO BE CAREFUL

With effect form April 2013, HM Revenue & Customs (HMRC) is introducing a new way of reporting PAYE, known as Real Time Information, or RTI.

The new system introduces significant changes to the way in which employers must report the payments and deductions they have made under PAYE.

Under the Pay as You Earn system, practice managers deduct an appropriate amount of income tax and national insurance contributions (NICs) for employees’ wages, in accordance with PAYE codes, tables and other instructions and procedures laid down by HMRC. Over the course of the year`, the amounts deducted should be a close match to the actual tax and NIC liability due.

The practice deducts the tax and NICs, add their own employer’s NICs, and pay the total HMRC, the net of certain adjustments, every month or quarter. However, it is not until the end of the tax year, when the annual return is completed, that the overall liability is reviewed and calculated.

Under this system, inaccuracies can go undetected for long periods of time, with the result that individuals can go for extended periods inadvertently paying the wrong amount of tax.

The aim of RTI is to help to ensure that individuals pay the correct amount of income tax and NICs throughout the year. It will also assist the Department Of Work and Pensions in administrating the Universal Credit due to be introduced in October 2013 enabling them to check the correct amount of credit is being paid to individuals.

While some essential aspects of the new system will remain the same, under the RTI the practice must submit information to HMRC regarding deductions they have made for PAYE, NICs and student loans when or before each payment is made, rather than at the end of the tax year.

HMRC also hopes to reduce the administrative burden on businesses. Under RTI, there will no longer be a need to submit forms P14, P35 or P35A and the PAYE end of year reconciliation process will be simplified.

RTI is being phased in from April 2013, with small sized practices, and payroll bureaux set to begin sending payroll information to HMRC in real time, from this date.

Getting RTI-Ready

It is essential to prepare for the changes ahead of time, in order to ensure that your payroll data is accurate and in appropriate format for RTI. The information you submit will be matched against records held on HMRC’s database, and any discrepancies could lead to inaccurate tax calculations or trigger a compliance check.

NHS Pensions Annual Return

The annual pensions return via electronic/paper SD55s have to be submitted no later than 2 months after 31st March each year. If practices do not meet HMRC’s requirement to supply information they may, under RTI, impose fines if:

  • Up to £300 for each member of staff.
  • An additional fine of up to £60 a day for each member of staff, each day the information is late.

For more information please contact Andrew Goddard or Laura Gore on 01704 215450,  andrew@forshaws.org.uk or laurag@forshaws.org.uk.