Are you ready to get to grips with the new PAYE system?
The new changes to the Real Time Information (RTI) could have costly implications for small businesses, including childcare providers in the PVI and independent sector.
The changes mean all business will have to send PAYE returns to HMRChttp://www.hmrc.gov.uk/ electronically using RTI enabled software every time you run a payroll, if you pay your staff weekly that means you will have to send the information on a weekly basis.
Information to be sent includes details of employees' pay, tax and deductions on or before payday, with alterations reported as they occur rather than at the end of the financial year.
The new system will be phased in from April 2013 and become mandatory by October 2013
If you haven't already done so have a look at the HMRC website to get an understanding of the requirements. http://www.hmrc.gov.uk/payerti/getting-started/index.htm If you are using a software package; for example Sage; contact the support desk for help and advice. If you outsource your payroll, check to ensure they have a plan in place for implementing the changes.
Previously some SME's including childcare business have not paid their PAYE on time, this has been beneficial to setting struggling with cash flow, this will become much harder as the HMRC will be able to identify where payments are overdue much quicker and may push to recover the debt; which in these difficult times could result in a number of childcare settings going out of business.
To ensure the implementation of the new system goes as smoothly as possible it is important that the quality of data you hold on your employees' mirrors that held by HMRC, for instance your payroll data may have an employee down as Jane Smith but HMRC may have the same employee on their system as Jayne Smith or Jane Sarah Smith.
Data that does not match or is inaccurate could cause major problems for employees' resulting in inaccurate payment of any benefits, RTI will also support the introduction of the Universal Credit (DWP welfare payments).
As an employer you could face financial penalties for failing to meet the new statutory requirements, hopefully HMRC will be lenient in the early stages to allow people to get used to the new system.
TIPS for making the transition to the new system easier:
1. Familiarise yourself with the new system by reading the information on the HMRC website and understanding how it will impact on your payroll processes and possibly on your cash flow.
2. Check the information you hold on your employees for accuracy, HMRC estimate that 80% of data quality problems are caused by inaccurate employee information.
3. Check your payroll system supports real time information, if not upgrade now.