Joshua Boyd from online accountants Crunch, guest writes for Startacus on the impact (so far!) of Real Time Information...
Every so often a big change will come to tax law that involves a massive overhaul of the system for whatever reason. The most recent such change was Real Time Information, or RTI. It was brought in with the new tax year back in April. The change affected any business who operated a PAYE system meaning it a massive chunk of British companies had to make use of this new system.
Before RTI a company would give HMRC all the PAYE details of their employees, such as pay, National Insurance etc., at the end of the year in one go. While meaning it only had to be dealt with once every 12 months, it did mean the chances of losing information increasing and it generally creating a bit of a mammoth task. HMRC decided this wasn’t the way to go and so brought in RTI.
What that means is that now companies have to produce a report each and every month so that HMRC can be kept up to date. The reason for this was to improve efficiency and to also decrease the amount of under of overpaid tax as mistakes can be rectified on a month-by-month basis. While sounding like it might cause more hassle, HMRC’s method for the collected the data should have meant that it would take far less effort.
All the information is collected electronically by connected a company’s payroll system to the Government Gateway. Once everything is setup the information is sent automatically and the business owner just has to keep their records up to date and that’s that. No more big report at the end of the year.
Failure to do so would of course lead to fines, but HMRC showed some leniency by saying that no one would be fined until after the new tax year. This means that you could fail to do anything, but if it was all sorted by April 2014 the taxman would give you a pass. Smaller businesses (50 and lower) were also given some time to be exempt as it was said they would be disproportionately negatively affected. This has now been extended until April 2014.
The system has struggled with glitches since its inception. As recently as the 4 June, users were reporting lost or omitted data that meant the wrong tax was paid. This is of course causing what RTI was meant to eradicate, wasted time. This hasn’t been across the board though and hopefully HMRC will learn from these issues and ensure they don’t continue.
RTI is a good idea in theory, but, with pretty much every initiative brought in by HMRC, it has had its teething problems. Luckily they had the foresight to over exemptions and some leeway with fines, so by the time that’s over hopefully the glitches will be too.
Joshua Danton Boyd is a copywriter for the online accountants Crunch.
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