Small businesses including contractors are preparing to submit payroll information in real time from April 6th.

Tuesday 2 April 2013

Contractors and other businesses are will have to report payroll information in real-time from this Saturday (April 6th).

Once the new tax year begins this weekend, employers will be expected to submit payroll data online on or before the day their staff are actually paid. Wages, starting and leaving dates and tax liabilities will all sent immediately to reduce bureaucracy contractors often face as the financial year comes to an end.

However, contractors who arrange to pay themselves more frequently than once a month will be given some breathing space. HMRC acknowledged just weeks before the deadline that businesses paying staff weekly or even bi-weekly could still be running their payroll once in each month, in which case they will face more problems with adapting to the new system than other companies.

In an attempt to lighten the load on companies with these more complex needs, the rules have been slightly relaxed. For the first six months, companies that have up to 50 employees and who would otherwise struggle to meet the deadline will be allowed to submit the payroll information whenever their usual payment period ends, provided the information is received before the end of the financial month on the 5th.

When the relaxation of the rules was announced so close to the deadline, some organisations accused the government of a panic reaction. A spokesman for the Forum of Private Business said that while the change was the “sensible option” at this point, the last-minute change was an indication that HMRC feared that a large proportion of small businesses were under-prepared.

Meanwhile, the Chartered Institute of Taxation said that by October, when full compliance will be expected of the exempted businesses, many of the teething problems with RTI could be ironed out and the special needs of smaller businesses accommodated more effectively.

Many businesses will not need to carry out many changes to their systems to prepare for RTI, since most software packages designed for payroll are already enabled to send the required Full Payment Submission.

Contractors and other very small businesses with nine or fewer employees can also adopt the software available on the HMRC website, which can be downloaded for free.

Switching to RTI is intended to reduce the amount of paperwork expected at the end of the financial year. The details included in the Full Payment Submission on or before the day when payment is made will mean that P35 and P14 forms disappear altogether.

New starters and departing staff will also be easier to handle. Because they can include the details in a Full Payment Submission, employers will no longer need to send part of the P45 form to HMRC, though the employee can still be given a copy for their own records. This will also be the case with other forms, including all variations on the P46.

Even so, elements will remain the same. Expenses and benefits reporting will remain unchanged, while the P60 will continue to appear every year. The procedure for reporting changes to personal details such as addresses and name alterations will remain as before, while HMRC has announced no changes to the dates for payment to the taxman.

With the right support, RTI could actually be relatively painless. Brookson has already invested in the right systems and made all the changes to take care of its customers’ affairs. Contractors and self-employed professionals can sit back, relax and let Brookson do all the hard work, keeping both freelance workers and the taxman happy.

Brookson has produced a handy guide for contractors who deal with their own payroll which covers what you need to do, checks that you should be making with your current software and a summary of changes.

By Victoria McDonnell

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