In order to facilitate your migration to RTI, which is due to come into effect from April 2013, the latest version of the QTAC Payroll software for 2012-2013 tax year has had additional fields added. Some of these will be need to be completed when you will be legally required to submit RTI information to HMRC from April 2013.

We have also provided tools in the Company>Bulk Amendments menu options to help you set these fields.

We strongly suggest that you obtain the required information and enter it into your payroll before the end of the 2012-2013 tax year.

The new fields are:-

Normal Hours Worked

You will find that all employees are set to the ‘30 hours or more’ option automatically.

You should use whichever of the four bandings is most appropriate to the individual, according to the number of hours you expect them to normally work in a week.

If your employee is on paid leave, for example annual leave or sick leave, please report the normal hours worked, given its ordinary everyday meaning of regularly, usually, typically. If you do not consider any of the first 3 options are appropriate then select ‘Other’.

In the case of a teacher who normally works 30 or more hours a week during term time then that is the selection that should be used during school holidays.

Irregular Payment

HMRC will check if employees have not been paid for a specific period of time (expected to be 13 weeks) and will treat them as having left that employment. To avoid that happening for employees who do not get paid regularly, check the irregular payment indicator in the employee Pay Rates tab in Employee Maintenance. An amendment will not be classed as an irregular payment.

Passport Number

As an employer, you need to ensure that each prospective worker is eligible to work in the UK before their employment commences. When you make the necessary checks, if a prospective employee provides a passport the number should be noted and recorded in this field. Note that this is not a mandatory field and is not required for existing employees.

Payroll ID

HMRC will no longer be using the employee works/staff number to recognise employee employments within a company. Where an employee has two or more separate employments within a company these should be distinguished by providing a unique entry in the Payroll ID field.  Where an employee has two separate employment contracts with the same employer the Payroll ID will indicate to HMRC which employment a submission relates to. 

Note that within our software if a new employee is added with no NI number a random PayrollID will be generated and used to identify the employee in all future submissions to HMRC.

Existing Employee Data

We have provided a report which will be found in the menu option Reports>Employee>RTI Data Check to indicate employees where their current information may be incorrect or incomplete. This will indicate employees who do NOT have:-

full forenames, only initials

an employment start date

a date of birth, or the date of birth is over 140 years ago

an NI number 

any address where the employee has no NI number

The data for these employees should be corrected before you start submitting RTI information since this type of data is likely to cause a rejection of the RTI messages, or a query from HMRC.

The guidance from HMRC relating to this information is as follows:-

Forenames

Always provide the individual's full and official forename(s) and not just their initial(s).

Make sure that their forename(s) and surname are in the correct fields.

Check that you have spelt the names correctly. Include a middle name if the person has one, for example 'John Michael Smith'. Simply putting an initial such as 'J' makes it difficult for HMRC to trace the correct account.

Check an official document to ensure that you have spelt the name right - 'Smith' and not 'Smyth'.

Date of birth

Always provide the correct date of birth. Do not enter a default date or make up date of birth

National Insurance number

Always enter the correct National Insurance number. Do not make up a number, use a default number or use someone else's. The number must begin with two letters, followed by six digits and end with a letter which will be either A, B, C or D. No matter what the reasons are that lead to uncertainty over an employee's National Insurance number, you must take action to ensure you give HMRC the correct number.

If you have any doubts about the validity of a National Insurance number you can trace the correct number using the HMRC National Insurance tracing service by completing Form CA6855, which is available to download from the HMRC website http://www.hmrc.gov.uk/forms/ca6855.pdf

Verification

To make sure you have the correct details, wherever possible please check the information you need from an official source such as:

• HMRC and /or Department for Work and Pensions documentation

• Passport documentation

• a birth certificate

Recent Developments

P45 to be retained

After consultation with employers HMRC have decided that the P45 starter/leaver process will remain unchanged until all employers are submitting RTI information. The process will be reviewed again at that point in time.

However, note that the submission of P45(1) and P45(3) information to HMRC will not be necessary when a company is submitting RTI information, and that the paper forms are being retained to achieve constancy of information transfer between employers when employees change employments.

RTI Pilot goes live

By 11:00 am on the 11th April 2012 the first 2 RTI submissions had been made to HMRC.

In order to facilitate your migration to RTI, which is due to come into effect from April 2013, the latest version of the QTAC Payroll software for 2012-2013 tax year has had additional fields added. Some of these will be need to be completed when you will be legally required to submit RTI information to HMRC from April 2013.

We have also provided tools in the Company>Bulk Amendments menu options to help you set these fields.

We strongly suggest that you obtain the required information and enter it into your payroll before the end of the 2012-2013 tax year.

The new fields are:-

Normal Hours Worked

You will find that all employees are set to the ‘30 hours or more’ option automatically.

You should use whichever of the four bandings is most appropriate to the individual, according to the number of hours you expect them to normally work in a week.

If your employee is on paid leave, for example annual leave or sick leave, please report the normal hours worked, given its ordinary everyday meaning of regularly, usually, typically. If you do not consider any of the first 3 options are appropriate then select ‘Other’.

In the case of a teacher who normally works 30 or more hours a week during term time then that is the selection that should be used during school holidays.

Irregular Payment

HMRC will check if employees have not been paid for a specific period of time (expected to be 13 weeks) and will treat them as having left that employment. To avoid that happening for employees who do not get paid regularly, check the irregular payment indicator in the employee Pay Rates tab in Employee Maintenance. An amendment will not be classed as an irregular payment.

Passport Number

As an employer, you need to ensure that each prospective worker is eligible to work in the UK before their employment commences. When you make the necessary checks, if a prospective employee provides a passport the number should be noted and recorded in this field. Note that this is not a mandatory field and is not required for existing employees.

Payroll ID

HMRC will no longer be using the employee works/staff number to recognise employee employments within a company. Where an employee has two or more separate employments within a company these should be distinguished by providing a unique entry in the Payroll ID field.  Where an employee has two separate employment contracts with the same employer the Payroll ID will indicate to HMRC which employment a submission relates to. 

Note that within our software if a new employee is added with no NI number a random PayrollID will be generated and used to identify the employee in all future submissions to HMRC.

Existing Employee Data

We have provided a report which will be found in the menu option Reports>Employee>RTI Data Check to indicate employees where their current information may be incorrect or incomplete. This will indicate employees who do NOT have:-

full forenames, only initials

an employment start date

a date of birth, or the date of birth is over 140 years ago

an NI number 

any address where the employee has no NI number

The data for these employees should be corrected before you start submitting RTI information since this type of data is likely to cause a rejection of the RTI messages, or a query from HMRC.

The guidance from HMRC relating to this information is as follows:-

Forenames

Always provide the individual's full and official forename(s) and not just their initial(s).

Make sure that their forename(s) and surname are in the correct fields.

Check that you have spelt the names correctly. Include a middle name if the person has one, for example 'John Michael Smith'. Simply putting an initial such as 'J' makes it difficult for HMRC to trace the correct account.

Check an official document to ensure that you have spelt the name right - 'Smith' and not 'Smyth'.

Date of birth

Always provide the correct date of birth. Do not enter a default date or make up date of birth

National Insurance number

Always enter the correct National Insurance number. Do not make up a number, use a default number or use someone else's. The number must begin with two letters, followed by six digits and end with a letter which will be either A, B, C or D. No matter what the reasons are that lead to uncertainty over an employee's National Insurance number, you must take action to ensure you give HMRC the correct number.

If you have any doubts about the validity of a National Insurance number you can trace the correct number using the HMRC National Insurance tracing service by completing Form CA6855, which is available to download from the HMRC website http://www.hmrc.gov.uk/forms/ca6855.pdf

Verification

To make sure you have the correct details, wherever possible please check the information you need from an official source such as:

• HMRC and /or Department for Work and Pensions documentation

• Passport documentation

• a birth certificate

Recent Developments

P45 to be retained

After consultation with employers HMRC have decided that the P45 starter/leaver process will remain unchanged until all employers are submitting RTI information. The process will be reviewed again at that point in time.

However, note that the submission of P45(1) and P45(3) information to HMRC will not be necessary when a company is submitting RTI information, and that the paper forms are being retained to achieve constancy of information transfer between employers when employees change employments.

RTI Pilot goes live

By 11:00 am on the 11th April 2012 the first 2 RTI submissions had been made to HMRC.

The Pension Act 2011, entailing the automatic enrolment of eligible employees, constitutes a material change in the U.K. pension arrangement. The annual review, the objective of which is to allow for flexibility within the scheme to take account of economic or social pressures, has recently made a number of proposals.

The Government is required to review the thresholds each year to decide if any changes are required. It had been suggested that a longer period was preferable between reviews in order to maintain stability and future planning, however this was rejected and the annual review maintained.

A key thread running through the entire consultation is the overwhelming desire of all concerned to keep the process as simple as possible. The consensus favours the alignment of the automatic enrolment trigger points, with existing PAYE thresholds. 

The reasoning behind this is the widespread understanding and acceptance of these thresholds amongst employers and employees, thus making the education process easier than the apparent use of an arbitrary threshold and the consequent workload in explaining these thresholds. However, it is recognised that this link is not set in stone and is open for review depending on economic and social conditions.

The new automatic enrolment pension scheme is targeted at low to medium earners, who need to save more for their retirement. Whilst this may appear straightforward, the system has to be designed so that it does not in any way penalise certain groups of people, be that on reasons of income, sex, race, religion etc.

There was discussion around the pay reference period and it was accepted that the enrolment thresholds will be pro rata in line with the pay period, such as weekly, monthly paid. It should be noted that the regulations do not allow for a pay period of shorter than one week, even for irregular earning patterns.

The most favoured option is alignment with PAYE threshold for the automatic enrolment trigger and alignment with N.I. contributions for the qualifying earnings band.

The following is to be laid before parliament, for the 2012/2013 period.

• £8,105 for the automatic enrolment earnings band

• £5,564 for the lower limit of the qualifying earnings band.

• £42,475 for the upper limit of the qualifying earnings band.

More information can be found at: http://www.dwp.gov.uk/consultations/2011/auto-enrolment-revaluation.shtml

The Timetable for RTI

• Pilot
  • April 2012 - initial 5 employers to test that HMRC systems are functioning
  • May 2012 - 300 more employers all carefully monitored
• Pilot 2
  • July 2012 - 1,300 further employers to test that the guidance given by both HMRC and Software Developers is sufficient for mass migration
• Go/No Go decision
• Early Adopters
  • November 2012 – it is hoped that from this date to the end of the 2012-2013 tax year another 250,000 employers will be running RTI
• April 2013 – mass migration of all employers other than
  • Exceptions – large employers who have not been able to change their business processes
• Oct 2013 – mandatory for all employers

During the pilot only employers who have received an invitation from HMRC to participate in the pilot will be able to submit RTI files.

The HMRC migration team are still discussing the ‘on-boarding’ process for ‘Early Adopters’ and the mass migration of employers in 2013.

Preparing for Real Time Information

From April 2013 most employers will be mandated to submit Real Time Information ‘on or before’ the date that payment is made to their employees.

Over the last 11 months there have been many changes to the specified data requirements, but now there is a much clearer understanding of what data is required, and when, particularly when an employee starts a new employment, or leaves a current one.

There will be a number of QTAC users participating in the pilot that starts in April 2012, so that we can be confident that in April 2013 the QTAC payroll system will have been designed to allow our customers to provide HMRC with RTI information with minimal extra effort.

There are issues that employers will need to be aware of, and there may be changes required to some existing business processes, and I will be providing more detail after HMRC have published their employer guidance on RTI.

One thing all employers should be doing from today is ensuring that their employee data is ‘clean’. In particular the following 4 items are used by HMRC to identify an individual and should therefore be as correct as possible:-

1. Employee names – ensure they are correctly spelled and full forenames are used if known rather than just initials
2. NI numbers - if known these should be entered in the employee record. Do not enter anything if the employee’s NI number is not known
3. Date of Birth – the employee’s official date of birth should be used. If the employee has not provided a date of birth do not make one up and do not use a default setting
4. Gender – ensure you have recorded the correct employee gender. This is specified as being the employee’s current gender.

There is a dedicated area of the HMRC website where employers can see the latest documents released by HMRC.

http://www.hmrc.gov.uk/rti/employerfaqs.htm

If you pay your employees by ‘direct’ BACS, which means you have a BACS submission user number, and can receive BACS submission reports, then you need to check with your BACS software provider that they will be able to accept the revised BACS export format that we will be providing to comply with the RTI requirements.

HMRC’s message is:-

“We would like to remind you that correct and valid data is critical to the effective operation of PAYE, and has a wider impact on the service to employees. Could you please take all reasonable steps to ensure that all employee personal information, including the address and country identifier, is complete and correct and that the indicators used (for example, the deceased indicator) are always appropriate. When using the PAYE online service, please ensure that fields are not populated with null or invalid data, which will create system errors and unnecessary re-work of mismatched items. Because we share data with other parts of HMRC and with the Department of Work and Pensions (DWP) employees can be adversely affected by erroneous data that cancels benefit entitlement or triggers some other action (for example, as a consequence of a mistaken belief that an employee has changed address).”

Notes for Payroll Software Developers (June 2010)

Pension’s legislation in the UK is to undergo the biggest change for generations.

Companies will be required to offer employees a pension contribution and each company must have a pension in place into which employees will automatically be enrolled. This could be an existing or new pension scheme, as long as it "qualifies". If a company does not have a qualifying pension scheme, then it must introduce one. There are a number of schemes being made available, which are likely to offer different pros and cons to both the employee and consequently the employer.

The new legislation requires auto-enrolment of eligible employees. This legislation will affect all employers and the phase in was due to be over a four year period from 2012, however this may well change depending on the prevailing economic climate.
Employers will have responsibility for ensuring they have a compliant scheme in place and that the correct employers and employees contributions are paid in to the scheme.
For many companies this may involve an increased cost for each employee enrolled. The proposed contribution phasing period is listed below, but as mentioned above this could well change.

These costs are based on a pensionable pay band, which as has yet to be defined.

It is important to note that there is no obligation to offer the NEST pension scheme to employees, however a suitable scheme must be offered and no barriers should be put in place, which may deter employees from joining, which even covers requiring an employee to sign a form.

Employer Responsibilities

Employers are free to select any appropriate occupational or group personal pension “automatic enrolment scheme” to offer their staff.

The employer must ensure their choice of scheme satisfies the primary requirements, which are:
•    It must allow “auto enrolment”
•    It must not force any member to make a choice or provide any information. For example a scheme must provide a default investment fund suitable for all categories of staff irrespective of age, income or attitude to investment risk.
•    The scheme must be registered with The Pension Regulator.

Companies that do not have a suitable plan will need to seek a provider of a qualifying pension scheme.

With the introduction of RTI from April 2013 there are a number of changes that employers will need to be aware of.

Firstly there is the need to obtain employee information before the first payment is made to the employee:-

• The employee’s name, date of birth, gender and NI number should be obtained
• If the employee cannot supply an NI number then at least one line of the employee’s address should be obtained
• If the employee is from overseas then a passport number should be obtained as well as their country of origin

Secondly employees will no longer have P45’s to indicate taxable pay, tax paid and the tax code used in a previous employment.

The P45 is to be replaced by a ‘Leaver Statement’. The intention is that the Leaver Statement will contain at least the same amount of previous employment information as a P45, but not have to be in the rigid format of a P45.

Thirdly, and possibly most importantly from an employers’ perspective, is that HMRC will be able to calculate the amount of Tax and NI withheld from employees wages in a tax month, i.e. all payments made between 6th of a month and the 5th of the following month, along with employers NI liability.

If there are statutory recoveries to be claimed by the employer to reduce the liability to HMRC then these need to be submitted using an Employer Payment Submission, which indicates the amount by which the employer liability is to be reduced, before the payment becomes due.

Hence HMRC will be in a position to charge interest on any perceived underpayments on a month by month basis if the amount paid to HMRC by the employer is less than the total liabilities calculated from the RTI data.

During the pilot starting in April 2012 QTAC will be working with its customers who are engaged in the pilot to engineer a solution that will, as far as possible, reduce any risk of underpayments being made inadvertently.

Alex Rowson
Technical Director
QTAC Payroll Products

Follow Alex on Linked In

Qtac Solutions has been in the Payroll software business since 1994 and we have never really bought into the whole awards bandwagon.

After numerous corridor chats we felt it was perhaps time to stop hiding our light under a bushel and get involved. We have customers large and small whom have been users for longer than I care to remember, a significant number of which have been very generous in their comments.

After encouragement from various people, we decided to take the plunge and enter the Software Satisfaction Awards 2011.  Numerous forms were filled out and signed, Emails sent backwards and forwards and then we were in the fray.

We proceeded to ask our users if they would complete an online questionnaire regarding our performance and then waited with bated breath for the next two months to see what the verdict was.

We eventually received a call to say that we were in the short list for two categories. The staff were duly informed and were all extremely positive.

We now await the final verdict, which will be announced at The Software Satisfaction Awards 2011 on 18/10/2011 at The Grosvenor in London.

I am sure there will be a few nervous twitches and nail biting as the Winners in our categories are announced.

Perhaps we should have entered before!