industry monitor RTI issues
Changes ahead
John Black and Neil Tonks of MidlandHR’s legislation team discuss the effect of RTI on end of year processes and draw attention to some of the changes from 6 April
I
t is now March, the time of year when the thoughts of payroll departments naturally turn to the forthcoming year-end. The 2013/14 event has added interest because for many it is the first year-end under real time information (RTI). One of the benefits claimed for RTI is that it simplifies year-end by eliminating the annual return comprising forms P14 and P35. While it is true that these returns (and the annual reconciliation associated with them) are no longer with us, there are still things to be done and deadlines to meet. Firstly, you still need to submit the year-end declarations which used to be on the P35. These include the familiar questions like ‘Did you make any free of tax payments to an employee?’, but also include a declaration that you are making the final submission for the year in respect of a particular pay as you earn (PAYE) scheme. The information can be sent either on the final full payment submission (FPS) of the year or on the month twelve employer payment summary (EPS). If you run multiple payrolls, or process additional pay runs, it can be hard to determine which FPS is going to be the last, so it might be good practice to use the month twelve EPS for the declarations. In an ideal world, sending the FPS for the last pay run of the year and the month twelve EPS would be the end of the story and year-end would be a breeze. Unfortunately we all know life is not like that, as things frequently come to light which mean the values submitted to HM Revenue & Customs (HMRC) need adjusting. Under RTI, amended employee data
can be submitted on an additional FPS for the old tax year up to 19 April. After that, adjustments must be submitted in a different format termed an earlier year update (EYU). Amended EPS data is reported by sending an EPS for the old year – there is no special process after 19 April in this case.
In terms of processing, then, it is not too complicated. The other consideration is the possibility of incurring late filing penalties, which is of course not a new concept
...FOUR HOURS BANDS RATHER THAN THREE
under RTI. For 2013/14, no late filing penalty will be charged if the final FPS is submitted by 19 April, or an EYU is submitted by the 19 May. After this, penalties apply at a rate of £100 per fifty employees per month or part month.
On the subject of penalties, remember that late filing penalties will apply in-year with effect from the 2014/15 tax year. These will apply on a monthly basis where payment information is not sent to HMRC as expected on an FPS, or where you have not told HMRC on an EPS that no-one has been paid. The penalty is calculated on a sliding scale based on the number of employees on the PAYE scheme, ranging from £100 per month for schemes with less than ten employees to a maximum of £400 per month for schemes with 250 or more employees. In addition, where a return is late for three months or more
a further penalty may be charged, of five per cent of the tax/national insurance contributions that should have been shown on the late return.
No penalty will apply for the first month in each tax year that returns are filed late, and in addition penalties may be avoided if you have a reasonable excuse for filing late. To aid this, the FPS for 2014/15 contains a new field to allow you to explain late filing by selecting one of a list of reasons supplied by HMRC. This is not the only new or amended field on the FPS and EPS for 2014/15. There is not space here to go into all the changes but a few other things of note are: l the EPS has the facility to indicate to HMRC that the £2,000 employment allowance is being claimed in respect of that PAYE scheme l the EPS allows you to optionally supply details of a company (not employee) bank account for the receipt of any refunds which become due. l the list of values for the infamous ‘Normal hours worked’ field on the FPS has changed. There are now four hours bands rather than three. Depending on how your payroll software works, this may mean you need to make changes to your employee records. Payroll systems will have a variety of ways of implementing the RTI year-end, so it is important to ensure you understand the features available in your system and how to use them.
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