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Bookkeeping  •  Business Services  •  Business Tax  •  Payroll Tax  •  Personal tax  •  Small Business  •  Tax Planning

RTI signals the end of a useful tax planning loophole

By RJP LLP on 27 June 2013

Real Time Information (RTI) represents the biggest change to the way payroll information is collected and reported to HMRC for over fifty years. Since it was introduced in April, numerous issues have emerged which business owners should be aware of to avoid incurring penalty charges. To its credit, HMRC has been actively engaging with the business community to understand how this change affects employers and continues to do so.

Demonstrating their understanding, most recently, HMRC announced a further relaxation to the RTI reporting requirements for businesses employing 50 or fewer staff. Originally, smaller companies had until October 2013 to begin reporting every payment made to employees in real time, at the time of payment. This has now been extended to April 2014 and is a welcome development that has clearly been designed to support business owners as they adapt to the additional red tape demands created by RTI. However, smaller businesses are reminded that this relaxation does not mean that they don’t need to file in real time at all until the relaxation ends. They are required to report PAYE at least once a month until the end of the relaxation, rather than on or before every payment date.

One impact of RTI has been the closure of a previous loophole. Historically some companies have underpaid their PAYE and NICs during the year and made up the shortfall at the end of the tax year, in order to assist with their cash flow. HMRC of course were not aware of the true liability until the end of year form P35 was filed. One of the aims of RTI has been to ensure the correct liabilities are paid at the correct time and businesses now have to report exact PAYE and NIC information in electronic format immediately after every payroll processing date. Even businesses that can take advantage of the relaxation above still must file an electronic return at the end of each month.

Where there are cash flow issues however, it is still possible to formally apply for a longer period of time in which to pay taxes through HMRC’s Time to Pay (TTP) arrangement. This offers a fixed payment timetable, which is agreed on a case by case basis. If you are finding it difficult to keep up with your PAYE demands as a result of RTI we recommend you speak to us as soon as possible so we can discuss the best way to submit a formal TTP proposal.

As a separate issue, if funding (and cash flow) is an issue for your business there are also a variety of other options to consider, some of which have only recently become available. One example is peer to peer lending, which we discuss in a separate article this month.

For more information on RTI compliance and Time To Pay (TTP) agreements, please contact Simon Paterson by emailing sp@rjp.co.uk.

 

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Real Time Information (RTI) represents the biggest change to the way payroll information is collected and reported to HMRC for over fifty years. Since it was introduced in April, numerous issues have emerged which business owners should be aware of to avoid incurring penalty charges. To its credit, HMRC has been actively engaging with the business community to understand how this change affects employers and continues to do so.

Demonstrating their understanding, most recently, HMRC announced a further relaxation to the RTI reporting requirements for businesses employing 50 or fewer staff. Originally, smaller companies had until October 2013 to begin reporting every payment made to employees in real time, at the time of payment. This has now been extended to April 2014 and is a welcome development that has clearly been designed to support business owners as they adapt to the additional red tape demands created by RTI. However, smaller businesses are reminded that this relaxation does not mean that they don’t need to file in real time at all until the relaxation ends. They are required to report PAYE at least once a month until the end of the relaxation, rather than on or before every payment date.

One impact of RTI has been the closure of a previous loophole. Historically some companies have underpaid their PAYE and NICs during the year and made up the shortfall at the end of the tax year, in order to assist with their cash flow. HMRC of course were not aware of the true liability until the end of year form P35 was filed. One of the aims of RTI has been to ensure the correct liabilities are paid at the correct time and businesses now have to report exact PAYE and NIC information in electronic format immediately after every payroll processing date. Even businesses that can take advantage of the relaxation above still must file an electronic return at the end of each month.

Where there are cash flow issues however, it is still possible to formally apply for a longer period of time in which to pay taxes through HMRC’s Time to Pay (TTP) arrangement. This offers a fixed payment timetable, which is agreed on a case by case basis. If you are finding it difficult to keep up with your PAYE demands as a result of RTI we recommend you speak to us as soon as possible so we can discuss the best way to submit a formal TTP proposal.

As a separate issue, if funding (and cash flow) is an issue for your business there are also a variety of other options to consider, some of which have only recently become available. One example is peer to peer lending, which we discuss in a separate article this month.

For more information on RTI compliance and Time To Pay (TTP) agreements, please contact Simon Paterson by emailing sp@rjp.co.uk.