What Is RTI: Everything You Should Know

Effectively managing payroll can be a complex task for small and large businesses as it involves ensuring accurate compensation, tax deductions, benefits, and compliance with labour laws. One crucial part of the UK payroll is Real-Time Information (RTI), introduced by the government in 2013. Its central concept involves businesses reporting their payroll information in real-time to Her Majesty’s Revenue and Customs (HMRC) as they pay their employees.

This process significantly trumps the older practice of end-of-the-year entries, allowing for more prompt, efficient, and accurate reporting. This blog elaborates on crucial aspects of RTI, such as Full Payment Submissions (FPS), Employer Payment Summary (EPS), compliance recommendations, consequences of non-compliance, the implications for temporary and seasonal workers, and the value of RTI-compliant payroll software. So, let’s begin!

What is an RTI?

RTI, or Real-Time Information, was enacted in April 2013. The essence of RTI is that employers must forward detailed information to HMRC every time they pay their employees. This mechanism is a departure from the previous system, where information was dispatched only at the end of the tax year.

Overview of Real-Time Information

Real-time information (RTI) revolutionised payroll processes mandated by HM Revenue and Customs in the UK. This system requires employers to report payroll data, including employee pay and deductions, throughout the tax year. Employers must submit Full Payment Submissions (FPS) and Employer Payment Summaries (EPS) to HMRC under RTI.

RTI ensures accurate and timely reporting, benefiting both employers and employees. The introduction of RTI payroll software streamlined payroll functions, enhancing efficiency and compliance. This requirement applies to businesses of all sizes, ensuring transparency and accuracy in payroll operations.

What Is Full Payment Submission (FPS)?

The Full Payment Submission (FPS) is the primary type of submission under RTI and comprises employee payments and applicable deductions that employers must provide each time they make a payment to an employee.

HMRC utilises this submission to determine how much PAYE and National Insurance contributions (NIC) are due from employers each tax month.

Purpose and Importance of FPS

Now, let’s understand the importance of FPS. FPS is integral to the RTI system for several reasons:

1. Timeliness: FPSs must be submitted whenever employers make a payment to their employees, ensuring up-to-date information.
2. Accuracy: The HMRC leverages these submissions to calculate how much PAYE and NIC liability is due from businesses each tax period.
3. Compliance: Proper and timely FPS filing prevents compliance issues and potential penalties.
4. Employee Record Keeping: Detailed FPS records can provide a thorough history of individuals’ earnings and deductions, which may be essential for future reference or resolving disputes.

Consistent and prompt FPS filings ensure a more accurate, efficient, and compliant payroll process.

What Is Employer Payment Summary (EPS)?

On the other hand, the Employer Payment Summary (EPS) is only submitted when you need to inform HMRC of any alterations to their liability, such as reclaiming statutory payments or when you have no payments to file. This submission should ideally be made when or before the relevant monthly or quarterly liability payment is made to HMRC.

Understanding EPS and When to Submit

EPSs serve to adjust the liability calculated based on the FPS. Under certain conditions, employers might need to reduce the amount of tax they owe. These scenarios can include the recovery of statutory payments, instances where no employees were paid in a particular month, or where Construction Industry Scheme (CIS) deductions are claimed.

In these cases, the EPS functions to advise HMRC of changes to your liability. It’s also best practice to submit an EPS when:

1. Your business didn’t pay any employees in a tax month.
2. You’re reclaiming parental, adoption, maternity, paternity, or shared parental pay.
3. Reclaiming CIS deductions for limited companies.

Being mindful of the timing and content of your EPS can help optimise your payroll management and avoid miscommunications or adjustments later on.

How to Comply with RTI for Payroll?

Complying with RTI involves confirming that your business is ready for this new system, whether through internal record-keeping or through outsourcing your payroll to an accountant or payroll service provider. Moreover, if running your payroll in-house using payroll software, check with your software provider to ensure RTI compliance.

Record Keeping and Data Quality

Here’s a table listing some of the essential details to check for accuracy in your employee records as part of RTI compliance:

To be RTI compliant, businesses must invest time in auditing their employees’ payroll data. This is crucial because, under RTI, the information submitted to HMRC every time employees get paid is cross-referenced against their stored records.

Suppose the submitted records don’t match the stored data at HMRC. In that case, it might create duplicate or inaccurate records, leading to incorrect tax calculations or HMRC compliance inspections.

Therefore, precise and up-to-date employee record-keeping forms a critical foundation for abiding by the RTI stipulations.

Why Is Accurate Payroll Data Crucial for RTI Compliance?

Accurate payroll data is crucial for RTI compliance, ensuring proper tax submissions to HMRC and preventing errors in calculations, deductions, and employee benefits.

Here are the reasons accurate payroll data is crucial for RTI compliance:

1. RTI requires employers to report payroll information promptly and precisely every time they process payroll.
2. Mistakes in this data can lead to penalties, audits, administrative issues, incorrect tax codes or delays in employee benefits, affecting both businesses and their workforce.
3. By maintaining accurate payroll records, employers can foster trust with employees and tax authorities, reduce compliance risks, and streamline operations.
4. Precision in payroll data ensures that tax and National Insurance contributions are correctly calculated and reported, preventing delays in benefits or discrepancies in tax records.
5. This safeguards compliance and helps businesses maintain a positive reputation with HMRC and their employees.

What Are the Consequences of Non-Compliance With the RTI?

Non-compliance with the RTI system can lead to profound implications for businesses. HMRC can impose fines if your FPS wasn’t submitted on time, you didn’t send the expected number of FPSs, or you failed to send an EPS when you didn’t pay any employees in a tax month.

Fines and Penalties

1. Late FPS: If your FPS was late but not more than 3 days, you usually won’t receive a penalty. However, repeating this more than once in a tax year can invite penalties.
2. Inaccurate FPS: Incorrect FPS submissions can also warrant financial penalties.
3. Missed EPS: Not sending an EPS when no payments were made to employees in a tax month can also incur penalties.
4. Number of Employees: The size of your business dictates the penalty amount. Fines range from £100 for small businesses with 1-9 employees to £400 for businesses with 250+ employees.

Failure to comply with these regulations can result in financial penalties and affect your reputation with your employees and customers, so it’s best to adhere strictly to RTI guidance.

What Are the Rules for RTI for Casual, Seasonal, and Temporary Employees?

RTI extends to casual, seasonal, and temporary personnel as well. In other words, employers must include them in their payroll and issue relevant information to HMRC each time they receive their payment.

The Difference in Reporting Requirements

Given the inconsistent nature of casual, seasonal, and temporary employees’ working patterns, specific points must be considered when considering RTI regulations. This includes:

1. When recruiting a new staff member, treat them like a full-time hire. This means accepting the P45 form the employee brings from previous employment. They should complete a starter checklist if they don’t possess a P45.
2. When the employee leaves the company, you must indicate that they’ve received their last payment and have left the enterprise. Their final FPS will include the leaving details, signifying to HMRC that they are no longer employed in your business.

This process ensures a transparent flow of accurate information to the HMRC, keeping your business compliant and on track.

What Is the Use of Payroll Software for RTI Compliance?

Selecting an RTI-compliant payroll software is crucial for maintaining correct and efficient payroll data submission. Cloud-based payroll software may be beneficial, as your software provider should be facilitating the software to make seamless and automatic RTI returns.

Benefits and Features

Investing in RTI-compliant payroll software can bring several advantages:

1. Accuracy and Efficiency: Software eliminates the need to input data, reducing errors and streamlining the process manually.
2. Automatic RTI Returns: Cloud-based payroll software can automatically facilitate RTI returns, saving time and energy.
3. Payroll Analytics: Most software offers advanced features like payroll analytics that provide insights into your payroll operations.
4. Automated Updates: Payroll software updates itself with the newest tax rates, pension auto-enrollment thresholds, and other calculations.
5. Record Keeping: Archiving past payroll data becomes more manageable with digital solutions, a significant advantage for future audits or inquiries.

Need help with Payroll Managing? Reach out to Direct Payroll

Managing payroll can be challenging, particularly with the complexities of Real-Time Information (RTI). RTI requires businesses to report payroll details to HMRC every time employees are paid, including tax, National Insurance, and other deductions.

Many businesses are, however, unaware of what is RTI in payroll, its purposes, and thus need the help of an expert. If you’re finding RTI and payroll management a bit overwhelming, Direct Payroll is here to help.

Our experienced team ensures your submissions are accurate, timely, and fully compliant so you can focus on growing your business. Get in touch with Direct Payroll today for seamless, hassle-free payroll services.

Conclusion

The implementation of RTI has significantly improved and transformed traditional payroll systems. It makes reporting more accurate and efficient and ensures that individuals promptly receive what they should. In essence, RTI places the responsibility on employers to report pay and NICs in real-time, using either FPS or EPS.

To stay compliant with RTI, businesses may choose payroll software, which, apart from meeting RTI requirements, offers many beneficial features like automation and real-time analytics. Penalties for non-compliance can be steep – therefore, consistency, accuracy, and quality of payroll data are paramount to staying on the good side of RTI regulation.

Understanding these elements of RTI is crucial for every UK business to manage their payroll operations effectively and stay legally compliant.

Frequently Asked Questions

What is an RTI filing?

An RTI filing is a mandatory real-time update that employers send to HMRC regarding employee payments and deductions through FPS or EPS.

How often do I need to submit RTI data to HMRC?

Employers must submit RTI data to HMRC every time they pay their employees, usually via an FPS. An EPS may be needed monthly or quarterly under specific circumstances.

What information is included in an RTI submission?

An RTI submission includes details about employee pay, tax, National Insurance Contributions, and any statutory deductions made during the pay period.

What happens if I don’t comply with RTI?

Non-compliance with the RTI decree can result in penalties from HMRC, which depend on the size of your business.

What are the benefits of RTI for the UK payroll?

RTI improves the efficiency and accuracy of payroll reporting, ensures individuals receive their due pay promptly, and reduces the risk of penalties due to errors or omissions.