Change required for all employers

All employers will have to change the way they process payroll in 2013.  If your organisation pays wages to anyone including salaried directors, you will need to provide information in “Real Time” to Her Majesty’s Revenue and Customs (HMRC).  Real Time Information (RTI) requires employers to submit payroll information before each salary payment to staff.

Salary payments are any payments that are subject to National Insurance or Pay as You Earn (PAYE) deductions.  Reimbursement of staff expenses or advances of loans to staff are examples of payments that do not need to be notified as part of RTI as they are not salary payments.

Deadline for compliance

From January 2013
Large employers to start using RTI

From April 2013
Medium sized employers to start using RTI

From August 2013
Small employers to start using RTI

October 2013
Migration complete

In-house or Outsource?

If you use an agent, payroll bureau or payroll service provider, you must talk to them now about the service they will provide for you in future, and ask what you need to do to get ready for RTI.  All providers should be set up to be compliant with RTI, but you may need to change your systems or the timing of the information that you provide to them.  Many providers will use RTI as a premise for increasing their fees.  If this is the case you will need to question why this is the case.

The change to RTI is a good time to assess whether you should operate your payroll in-house or use an external provider.  Alterledger can advise you on the advantages of each option and we can help you set up your own system with online software or process your payroll using the information that you provide each month.

If you run your own payroll system, you need to get RTI-enabled software in order to send your PAYE information to HMRC online every time a payment is made. You can do this in three ways:

1. Commercial payroll software, upgrading your existing software if necessary.
2. Payroll service provider, such as an accountant or a payroll bureau, who will do it for you.
3. Free payroll software packages or HMRC’s free Basic PAYE Tools, available to those with nine or fewer employees.

There are potential cost savings of operating your own payroll system, but to make sure you comply with HMRC regulations you should refer to the HMRC website or get advice from an accountant or other payroll professional.

If you currently pay staff weekly, you may find that external providers will become more expensive.  In this case it may be better for you to operate your own payroll system to ensure that staff are not waiting for information to be processed by your accountant or payroll bureau.  Alterledger can provide the training you need in order to operate your own system.  If you are operating your own system it is worth bearing in mind that it is better for two people to be familiar with the system so that there is cover for holiday and illness as well as a system of checks on timesheets and salary payments.

Cloud software

There are a number of cloud based payroll systems which will reduce the time you need to spend on processing your payroll.  These systems will automatically send the correct reports to HMRC as long as the relevant inputs are entered into the system.  Cloud software also reduces the time your accountant or payroll bureau would need to spend processing your payroll and should reduce your costs in the long run.  As cloud software is generally charged by monthly subscription there is no upfront cost and it is automatically updated with changes in regulations from HMRC.

Cloud software has a major benefit of being accessible at any time and from anywhere with an internet connection.  Data is backed up automatically and stored securely so there is reduced risk of records being lost compared to desktop solutions.  As all data is stored in the cloud all users and your accountant have access to information reducing the risk of fraud and phantom employees hidden on the hard drive of a single computer.

To discuss your options for RTI relating to your payroll, please contact Alterledger or visit the website alterledger.com/payroll-processing/ for more information.

Useful links

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