1. Justine Riccomini & Carol Flockhart Real Time Information 5 July 2012

2. Real Time Information (RTI) Payroll Changes 2 Real Time Information - background  It’s the reporting mechanism that is changing, not pay, pensions, tax or NIC  The payroll software gathers the info and submits it to HMRC via EDI or Govt Gateway  Employers who don’t have computers  …Mandatory for all?

3. 5 July 2012 Real Time Information (RTI) Payroll Changes 3 Why is RTI being introduced?  Help HMRC to identify its debt on a daily basis  Assist with information exchange between government departments  Tackle fraud  Support Universal Credit (DWP)

4. RTI – What are the next steps? DateEvent April 2012 onwardsRTI Pilot begins – and, subject to initial findings, expands October 2012Large employers encouraged to migrate early by joining the pilot April 2013Controlled migration of all employers begins October 2013  Migration ends; all employers using RTI  Universal Credits introduced 5 July 2012 Real Time Information (RTI) Payroll Changes 4

5. RTI – What’s happening at HMRC HMRC is:  Working with volunteer payroll software developers and employers - RTI Pilot  10 -20 employers prior to May  300 employers - May 2012  1,300 - July 2012  Large employers encouraged to migrate early by joining the pilot – October 2012  250,000 to have joined by March 2013.  Working with its IT supplier to develop the RTI system  Developing supporting business processes and guidance  Consulting on the legislation drafted to support the move to RTI  Undertaking a Data Improvement Programme to de-risk and support the successful implementation of RTI Real Time Information (RTI) Payroll Changes 5 July 2012 5

6. Current  Payroll calculated & processed periodically  Employees are paid  PAYE/NIC Remittances sent to HMRC AO  19 May – P35/P14 sent HMRC (Employer Annual Return)  31 May – P60 issued to employees RTI  Payroll calculated & processed periodically  Starters included in FPS  Employees are paid  FPS sent to HMRC on/before each pay date  Leavers included in FPS  HMRC is now aware of its debt  No annual return  P60s continue Real Time Information (RTI) Payroll Changes 5 July 2012 6 Current payroll process v RTI

7. The ideal payroll process Inputs – Static data -Variable data Payroll – Validate data from HR -Update software -Calculate and produce payslips Outputs – Tax/NIC – remittances - Pay - Accounting information - Pensions and other bodies 7 5 July 2012 Real Time Information (RTI) Payroll Changes

8. ...The reality! Accuracy of input data Manual Data input Software malfunction Calculations and technical knowledge of processors Authorisation and sign off Data mis- matching 8 5 July 2012 Real Time Information (RTI) Payroll Changes

9. Preparation, preparation, preparation  For bureaux, getting accurate information from clients  For employers, getting the characters right and ensuring all information is complete  Service level agreements or engagement letters  Arrears and cash flow difficulties  Management accounts  Time to pay arrangements 5 July 2012 9 Real Time Information (RTI) Payroll Changes

10. Stakeholders in RTI...it’s everyone’s responsibility RTI Info PAYE/ NIC/ Pension BranchesProcurementInternationalFinanceHRPayroll 10 IT 5 July 2012 Real Time Information (RTI) Payroll Changes

11. Procedure for commencing RTI Employer Alignment www.hmrc.gov.uk/softwaredevelopers/rti/payroll-alignment.pdf Once done, employer can send FPS Under RTI immediately Employer Annual Statement - 250 employees, or 250 but “split scheme”* First FPS – employers with <250 employees First FPS Must show all employees employed during the current tax year including starters, leavers and those not yet paid Must show hours typically worked by every employee in a week (for UC) 2 nd & subsequent FPSs Must only contain pay and deduction details for those employees paid on that pay day Several FPS’s may therefore be necessary in the same month dep. on pay periods If no payments made in pay period, a NIL FPS should be submitted 11 5 July 2012 Real Time Information (RTI) Payroll Changes

12. Some general (but important) points  SAO implications, reputational & operational issues  HMRC risk ratings  VAT and other taxes  Construction industry scheme  IR35 workers  Beneficial loans and FPS procedures  Share based payments (form 42 etc)  Pecuniary liabilities and Class 1NIC 12 5 July 2012 Real Time Information (RTI) Payroll Changes

13. Contd...  Aggregation of earnings  Expatriates  Dormant casuals (e.g. agriculture, seasonal work, Christmas, students, busy periods)  Missing information – starters:  If leaver’s statement incorrect treat as not received  If received after FPS due, disregard  All starters – series of questions and code on leaver’s statement (like a P45/P46 hybrid)  Failure to pay – HMRC will specify amount outstanding then issue notice to pay in 7 days from due date 13 5 July 2012 Real Time Information (RTI) Payroll Changes

14. Contd....  HMRC targeted support  Data items full list at: http://www.hmrc.gov.uk/softwaredevelopers/rti/RTI_I nitial_Guidance-v2.0.1.pdf Includes items such as passport numbers, partner details (HR processes and confidentiality/data protection issues) 14 5 July 2012 Real Time Information (RTI) Payroll Changes

15. Preparing your business for RTI Prepare Define stakeholders Understand what is required Assess state of readiness Assess transitional costs (new software, payroll bureau charges, training & admin time) Make the change Processes and policies Data accuracy Stakeholder training Going forward Compliance Review efficiency Snagging 15 5 July 2012 Real Time Information (RTI) Payroll Changes

16. Penalties  …Are coming!  Consultation – started last week  Watch this space 5 July 2012 16 Real Time Information (RTI) Payroll Changes

17. Summary  Prepare…now  Check, check and check again  Identify stakeholders and train everyone  Make sure there is an identified chain of responsibility which each link understands  It might not stop at PAYE…..(!) 5 July 2012 17 Real Time Information (RTI) Payroll Changes

18. RTI: help and support What?Where? Register for e-mail alerts www.businesslink.gov.uk/hmrcemploy eremailalerts RTI homepage http://www.hmrc.gov.uk/rti/index.htm FAQs for employers http://www.hmrc.gov.uk/rti/employerfa qs.htm Welfare Reform and Universal Credit http://www.dwp.gov.uk/policy/welfare- reform/ 5 July 2012 18 Real Time Information (RTI) Payroll Changes

19. Real Time Information Questions? Thank you for listening justine.riccomini@chiene.co.uk carol.flockhart@chiene.co.uk 5 July 2012 19 Real Time Information (RTI) Payroll Changes