The Real Time Information (“RTI”) rules finally hit the smaller employers. Employers with fewer than 50 employees are now required to report their payroll information under RTI.
This means that a report of payments made to employees and the associated deductions must be made to the tax office before the payments are made, although HMRC have recently announced that small employers will have a 3 day period of grace before penalties are imposed (WOW!). Before March, smaller employers only needed to make the report before the end of the month. This will impact most on those employers operating a weekly payroll, who will now need to submit 4 or 5 RTI reports each month rather than just 1, or those with multiple payment periods.
HMRC have had tremendous difficulties implementing this self-imposed monster, but it is their customers who will pay the price. For instance, we have only this week become aware of a one-man payroll suddenly sprouting a “Jekyll & Hyde” second employee within the tax office’s RTI system. Apparently, this has been caused by a very minor and inconsequential change in the payroll reports that have been submitted. We became aware of this apparent split of our client’s single employee into two separate people not because the tax office told us (or even our client), but because the client asked us about a tax code that he had received from the tax office which was clearly utter nonsense.
If you are an average sort of person then this most probably sounds like the ravings of a lunatic. I would agree! However, it could result in the employer facing additional costs. Having split this employee into two, the tax office will be expecting to receive final returns for both parts of him, and unless they get these then we fully expect that they will issue the employer with penalties. This despite the fact that both parts of the employee:
– share the same name and address
– share the same national insurance number
– take the same shoe size and share the same hat!
Also the report submitted by the employer in relation to the whole person will total the sum of all the individual reports that would have been made for both parts.
We fully expect to have to spend considerable time correcting this tax office fiction. No doubt the tax office will resist any attempt to charge them for this time but expect their “customer” to foot the bill!