The Future of PAYE


By October 2013, all employers will be required to report to HMRC on or before every occasion that an employee is paid.

Real Time Information (RTI) will collect information about tax and other deductions automatically each time an employer runs their payroll. This information will be submitted automatically to HMRC at the same time employees are paid.

System Changes and Similarities

There are two main changes to payroll under the RTI system.

1. Employers will be required to submit returns under RTI each time that a payment is made to

an employee. The RTI submission must include the details of all employees, including those who

are paid beneath the lower earnings limit (LEL), and this may be an area of practical difficulty.

If there are no employees paid over the LEL, then there will be no need to file, but should just

one employee goes over the LEL, there is a need to report all employees' earnings, not just

the one person that has breached the limit.

2. The need for annual forms such as P35, P14 and P38A disappears, with the last RTI return in a

year taking their place.

Additionally, if employers are paying their employees using BACS, they will have to make sure that the RTI return contains the BACS service user-number.

Casual Workers

Someone may need to be brought in to cover a Saturday night, but for their net pay to be paid in cash, RTI requires a submission on or before the time a payment is made.

Employee Leaving

When an employee leaves the employer will notify HMRC of the leaving date in an RTI submission. When an employee joins an employer the employer will still need to ask P46 type questions in order to determine the tax code to be operated.

The employer will still be required to:

Ø issue payslips to their employees, and

Ø issue P60s to their employees at the end of the tax year.

Employers will also be required to issue a 'final' tax/pay statement showing:

Ø tax paid to date, and

Ø taxable pay to date

to a leaving employee.

We would expect an employer to give a departing employee a statement showing the pay and tax paid in the employment. A payslip showing this would be sufficient. If this approach was adopted HMRC would envisage that under RTI employers would no longer be required to issue P45s to HMRC or to the employee.

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