Employers begin testing new Real Time Information system

12 Apr 2012

The first tranche of employers have begun testing the new PAYE Real Time Information (RTI) system, HM Revenue & Customs (HMRC) has confirmed. 

10 firms are currently participating in the pilot, with a further 310 volunteer employers and pension providers expected to join during May and June.

While the fundamentals of PAYE will remain the same (i.e. use of codes, employers deducting tax and national insurance), RTI will change how and when employers and pension providers report information to HMRC. It will require employers to provide information to HMRC for PAYE, national insurance and Student Loans at the point of pay.

Under the current PAYE system, employers tell HMRC what deductions they have made from employees’ pay after the end of the tax year. However, under RTI employers will report tax and national insurance deductions when, or before, payments are made.

It is hoped the new system will ensure that the correct deductions are made from pay, and result in more employees paying the right amount of tax and national insurance in the tax year.

‘RTI will ensure that the PAYE system meets the needs of the 21st century,’ said David Gauke, the exchequer secretary to the Treasury. ‘It will improve the service to taxpayers by making it easier to ensure that people pay the right tax after a change of job.’

He continued: ‘RTI will remove administrative burdens of £300m a year from employers, mainly from the abolition of the end-of-year PAYE returns process – the biggest single contribution that any tax change could make.’

Subject to successful completion of the pilot, large businesses will be required to start using RTI from April 2013. All businesses will be expected to use the new system from October 2013.

More information can be found at: www.hmrc.gov.uk/rti/index.htm

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