Countdown to the HMRC RTI deadline – why your small business can’t afford not to consider compliant software

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Last year a survey found that 81 per cent of UK businesses were completely unprepared for the introduction of Real Time Information (RTI). Indeed, just weeks before the system was introduced, almost half (46 per cent) of companies hadn’t even heard of it.

A year on from that study it appears that many small businesses in the UK that are PAYE-registered are still not adhering to HMRC’s RTI legislation when they process their payroll. If they miss the 2014 deadline however, they will face fines and additional interest on any tax owed.

So what exactly is RTI?

The introduction of RTI represents a fundamental reform of the PAYE (Pay As You Earn) system. RTI requires all UK employers to notify HMRC of their liability to PAYE as, or before, they make payment to their employees. This ‘real time’ reporting must be done electronically over the internet and replaces previous arrangements where employers only declared and reported their PAYE at the year end, with a P35 return.

What are the new deadlines?

RTI should already have been implemented from 6th April 2013 but HMRC issued a ‘relaxation’ to allow businesses who weren’t ready for the changes additional time to prepare and switch to RTI. This relaxation is due to end in most cases on 6th April 2014 and from this point on HMRC will start issuing fines and penalties to employers who are still not complying with RTI legislation.

What will happen if I don’t comply?

If you are not submitting the information required by the RTI legislation from the start of the new financial year from 6th April 2014, you will be issued with a fine dependent on the size of your business:

  • Micro businesses employing 1 to 9 employees will face a £100 monthly penalty per PAYE scheme operated.
  • Small businesses employing 10 to 49 employees will face a £200 monthly penalty per PAYE scheme operated.

Larger businesses will face even larger fines, with those with 50 to 249 employees fined £300 monthly and those with 250 or more employees fined £400 monthly.

Penalties will also be applied for late payments, based on the number of defaults where payments are either not paid in full and/or on time:

  • 1 to 3 defaults will result in a penalty of 1% of total amount that is late in the tax year
  • 4 to 6 defaults will result in a penalty of 2% of total amount that is late in the tax year
  • 7 to 9 defaults will result in a penalty of  3% of total amount that is late in the tax year
  • 10 or more defaults will result in a penalty of  4% of total amount that is late in the tax year

How can I get ready for RTI?

The best way to prepare for the switch to RTI is to implement RTI compliant software. Sage One is fully recognised and tested by HMRC and offers an online payroll software free download with a 30-day free trial.

If you fail to meet RTI requirements you will face penalties from HMRC and will still have to pay for RTI compliant software or a payroll service that uses it in order to avoid further sanctions. If you want to avoid unnecessary expenses, youcan’t afford not to consider RTI compliant software.

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