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Why do HMRC want your PAYE information in real time?

RTI online training courseOn 6th April 2013 Real Time Information (RTI) will be introduced in the UK. It is the most significant change affecting the administration of employees' pay, tax and National Insurance since the introduction of PAYE almost 70 years ago.

Many people are aware or becoming aware of the need to be prepared for the changes but the reasons why HMRC are pressing ahead with implementation have not been universally understood or accepted.

It is the view of HMRC that the current PAYE system has outlived its usefulness and is no longer fit for purpose. When it was introduced in 1944 the working environment, culture and practice was very different; people who found work tended to stay in the same job for many years. Modern patterns of employment are much more dynamic; there are many more short-term contracts, people move between jobs more frequently and many people have more than one job at the same time.

Another key driver, perhaps the most significant, is the introduction of the Universal Credit Benefit System in October 2013. This is a new single payment for people who are looking for work or who are on a low income. In order that accurate and prompt payments are made by the Department for Work and Pensions (DWP) it will be necessary for them to obtain current information about the earnings of employees.

HMRC are also hoping that the introduction of RTI will help to bring in revenue at the time that it should properly be paid. There is plenty of evidence to show that many employers do not pay the correct amount of tax for their employees until near the end of the tax year. There are no sanctions for non-compliance on a monthly basis under the current regime and it is believed that billions of pounds of tax remains uncollected at any one time.

Another reason for the changes is the notion that there could be some significant reduction in costs for employers, although there are conflicting views about where these savings will be made. There will be a reduction in administrative tasks such as submitting certain forms and returns, however there will also be transitional costs involved in using the new system and permanent costs for upgraded software.

RTI will be a very important weapon in the fight against identity fraud and fraudulent benefit claims. The nature and detail of information provided to HMRC will make it easier to identify those who have previously supplied false information in order to trick the system.

On 18th March, UK Training are presenting a live two-hour webinar which will help you understand and prepare for the imminent changes. It will guide you through how RTI will affect the payroll procedures within your business. Please visit this web page for full details.



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