Contractor real time information (RTI) advice

After the introduction of the Agency Worker Regulations in October 2011, we were busy preparing for Real Time Information (RTI), with direct support from HMRC (as part of their pilot scheme) to make sure that we submit the correct data in the correct format.

Here's some information about what RTI is and what it means.

What is RTI?

RTI is information about Income Tax, National Insurance contributions (NICs) and other deductions which employers have to provide to HMRC in real time when payments are made, instead of waiting until after the end of the tax year.

Why change the PAYE system?

Pay As You Earn was nationally introduced in 1944 to replace the existing annual or twice-yearly collections of tax. Back then, employees tended to stay in the same job from leaving school to the end of their working career. This is no longer the case and HMRC were not always informed of employees' earnings within a tax year - which resulted in over or under payments of tax that were not highlighted until the tax year end. The purpose of RTI is to ensure that more employees pay the right amount of Income Tax and National Insurance in the tax year.

What did this mean to PayStream?

We liaised with HMRC and CIPP during the consultation stages of RTI, as we wanted to be RTI compliant before the enforcement date. We implemented robust controls and warnings to ensure compliant data for certain fields such as 'name' because nicknames or preferred forenames are not accepted.

What did this mean for our contractors?

They saw no obvious difference as we did all the work for them. Since HMRC now have their full year employment history, they should never pay too much tax again.

What did this mean for our agencies?

RTI affects every company that has employees, regardless of size. Your PayStream contractors are already under RTI.

What did we learn from joining the pilot?

One of the biggest challenges for us was the data cleanse project which ensured that all of our contractors, paid in 12/13 tax year, had correct personal details in the required HMRC format. Our payroll and reporting systems had to be tailored to capture the additional fields required for RTI that were not previously declared under the year-end processes. Our reporting and submissions had to support the complications that surround contractors' irregular payments such as multiple payments made in the same pay period and bulk payments covering multi-pay periods, all of which have to be declared in the RTI submission.

Our main implementation costs came from having to upgrade our Bacstel-IP software to support the BACS cross references (Hash) which allows HMRC to corroborate the data returned against the payment made to the individual in preparation for Universal Credits.