HMRC RTI: Overview

Significant changes to the way payment details are communicated to HMRC

Real Time Information (RTI) is a priority government program aimed at improving the operation of PAYE. It will make the system better for individuals and easier for employers and HM Revenue & Customs (HMRC) to operate.

The current system has been in existence since 1948 so the changes proposed are very radical and mean a restructure of how all payments and deductions (i.e. Tax, National Insurance (NI), Sick Pay etc.) are reported to HMRC.

Under the new system, all employers will have to report employee tax and NI details along with other information, to HMRC every time a payment is made, instead of just once a year at the end of the tax year. The data reported each pay period will include statutory payment / deduction data and data relating to Starters and Leavers in a single file.

The key changes are:

• The current In Year Movements (IYMV) process will no longer be possible after April 2013.
• Starters and Leavers will be processed as part of the Full Payment Submission (FPS) report.
• Year End reporting to HMRC will become redundant.
• P60s will still be required for employees active 5th April.
• Payslips must include YTD tax figures for leavers.
• Multiple Employment will only use one personnel number to identify an employee to HMRC.

N.B. It has been confirmed that the P45 for leavers will remain for the forseeable future.

The channel for transmission and reporting of this data will be via BACS and the new file format will contain both the net pay data for making the deposits into employee's bank accounts, together with the statutory data for HMRC. The BACS communication will be two-way, with the Acceptance/Rejection reports coming back to the employers through BACS.

The new RTI systems will:

• make the PAYE process simpler for employers and HMRC
• enable HMRC to deal with late payments more effectively
• support the payment of Universal Credits
• make PAYE more accurate for individuals, reducing the number of bills and repayments sent after the end of the tax year
• reduce Tax Credits error and fraud
• aid the introduction of the government's Universal Credit initiative in October 2013

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Interim Solution

In response to concerns from the software and banking industries about the timescales for developing the ISO standards for use in the BACS channel, HMRC will also accept RTI data through Electronic Data Interchange (EDI) until at least April 2014 in addition to the internet channel.

HMRC announced that in addition to the tax data within the RTI submission, a cross-reference (hash) will also be required for each employee.

There are two parts to the cross-reference:

(a) a hash included in the RTI submission to HMRC;
(b) a random value inserted in field 7 of the BACS payment instruction.

The hash needs to be generated by payroll software and all of the elements used to create the hash, including the random string, need to be present in the Standard 18 file used by BACS for payment. The hash will then be reproduced as part of the payment process and sent with confirmation of payment to HMRC for matching with the tax data hash.

The Hash will encompass:

• originator bank sort code (6),
• recipient bank sort code (6);
• amount of payment in pence with no decimal point,
• no sign, no currency symbol (11)
• RTI indicator (4)

HMRC will match the hashes returned with the RTI data against hashes generated during payment file processing to inform HMRC’s compliance activity.

In April 2013 there will be two methods of reporting:

• Internet through the Government Gateway.
• Electronic Data Interchange (EDI). EDI for RTI will be available until at least 2014.

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Future BACS Solution

BACS is the HMRC’s strategic solution for RTI reporting and they are actively working with the banking and software industries to develop a service which will enable RTI reporting through BACS. This would enable employers who pay their employees through BACS to report RTI automatically at the time electronic payments are made to their employees.

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Why BACS?

• 90%+ employees paid via BACS
• Links & corroborates payment & associated information
• Validates payment & linked data
• Single channel for payment instructions & PAYE information

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