In case you hadn’t already noticed, April 2013 saw HM Revenue & Customs (HMRC) introduce a new way of reporting Pay As You Earn, or PAYE for short.
The new Real Time Information system (RTI) is the biggest change to PAYE since 1944 and requires employers to tell HMRC about tax, National Insurance Contributions, Student Loans and other deductions on the day or before they pay their employees, rather than at the end of the year.
Under the new RTI legislation, all information must be sent via the internet and on a timely basis – hence the use of the term ‘real time’.
It might seem like yet more tax work, but the government believes this will reduce the need for companies to send out corrections for overpayment or underpaying whilst also limiting the possibility of fraud.
For the majority of large businesses in Britain (holding over 5,000 employees), RTI became compulsory from April 2013. It’s set to become compulsory for all employers by October 2013 and if you’re wondering how this will affect your dental practice, here’s what you need to know.
Companies will need to submit information regarding deductions for all of their employees, including temporary and casual workers sourced via dental recruitment and those paid below the National Insurance Lower Earnings Limit.
The new guidelines state that employers will have to make four different types of submissions to HMRC. These include Full Payment Submission (FPS), Employers Alignment Submission (EAS), Employers Payment Summary (EPS) and National Insurance Number Verification Request (NVR)
You should already be familiar with FPS, which includes information regarding NIC and deduction made by the employer each time an employee receives a payment. EAS is mainly for businesses with over 250 employees (submission from bigger companies is optional) and is used by HMRC officials to align company and employee records with the data they have on their system.
EPS is only needed when you need to advise HRMC of any alteration to your National Insurance Contributions. This should be submitted before the relevant monthly or quarterly liability payment to the HMRC. Much like the name hints, NVR helps employers request the National Insurance Number of a new or existing employee when they are unable to provide one.
What you need to do
To prepare for RTI’s grand introduction in October, your best bet is to ensure that all of your payroll data is accurate and up-to-date. The new system will make it even harder for an incorrect name, National Insurance Number or date of birth to slip under the HMRC radar, so take plenty of time to familiarise yourself with the RTI way of working.
Most (if not all) payroll software companies are updating their programs so that come October, RTI reporting is fully integrated into the coding. This will probably be the case with the system you’re currently running on, although do seek clarification from the provider.
Once you have got your hands on the new software, you should expect a few bugs and teething problems to hamper the first few sessions. It might even be worth helping the operator of your payroll system, whether that’s a receptionist or practice manager, to get used to the requirements of RTI.
You’d be sensible to look into what you’ll need to provide and how often whilst setting aside some time for training and induction, which could take up to a few months to complete.
What RTI could mean for your dentistry
Potential fines – Companies that fail to comply with the new RTI system by April 2014 will find themselves on the receiving end of reprimands from HMRC. Employers will receive letters informing them of their non-compliance from October 2013 and a penalty could be issued if the relevant information isn’t up to date by 19 May.
A chance to improve filing – Although RTI might require a little more work from the employer, it could provide a good excuse for you to change a few things about how you conduct your filing. As everything has to be uploaded onto computers for submission online, it would be a smart idea to use memory devices to backup your files before they get sent off. This eradicates the need for you to hold records in filing cabinets and could encourage you to swap virtual for physical storage more often.
But without internet? – Without the internet your business can still function, but you will need to find a connection from somewhere in order to use RTI. Tax filing will therefore have to be done either at home or in a secure and trusted environment. If you have an unreliable internet connection, backing up your files as you enter the data will become an absolute must. This is simply due to the risk of information not making its way across to the HMRC in a period of downtime.