February 15, 2013 - Rachel Miller
From April 2013, Real Time Information (RTI) will be introduced – representing the biggest reform of business tax reporting in 70 years.
According to HMRC, the current tax reporting system is not "fit for purpose" and the introduction of Real Time Information (RTI) "will be better for employers, better for employees and better for Britain".
HMRC is writing to all employers this month telling them what they need to do to get ready for the introduction of RTI. The new system will affect all business owners using the PAYE system to pay their staff or themselves.
Under RTI, employers will benefit from simpler requirements for reporting to HMRC and from the abolition of the extensive annual tax return under the old system. According to HMRC, RTI will deliver savings to business of £300 million in reduced administration costs.
From April, HMRC will get tax details from companies every time wages are paid, rather than just once a year. This, says HMRC, will make records more accurate and up-to-date and will reduce the number of cases where someone is found to have under or overpaid tax.
Lin Homer, chief executive of HMRC, said: "Businesses should act now to be ready for April, when RTI comes in. PAYE directly affects every employee in the country and that is why it is vital that it reflects, on time and accurately, the tax circumstances of the millions of employees who depend on the system to get their tax right."
Homer added: "RTI delivers on all fronts. Business costs will be cut by £300 million a year, employees will be taxed more accurately and fraud and error in the tax credit system will be reduced by hundreds of millions of pounds every year."
Business can find more information on the HMRC website. It is also offering free software to help firms with nine or fewer employees to prepare for the change. There are more resources and RTI guidance on Tax Donut.