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April 2013

How The Biggest Change in PAYE Reporting Since 1944 Will Effect Businesses

Stuart Gordon

From April 2013, employers will be required to report PAYE in real time, meaning employees will have their information sent to HM Revenue & Customs (HMRC) on an on-going basis, as opposed to at the end of the financial year. The move to Real Time Information (RTI) reporting will be a gradual one, but by October of 2013, all employers and pension providers will have moved to RTI.

The move to RTI is the first significant change to PAYE since it was introduced in 1944 and whilst online reporting may have changed the way 40 million UK taxpayers details were submitted to HMRC, the same forms and the same timetable were used. The change, it is argued, is a necessary one as Stuart Gordon, Director of Accounts at chartered accountancy firm Hall Morrice explains.

" Reporting PAYE in RTI will enable HMRC to adjust tax-codes throughout the year and therefore should mean that fewer people will be affected by the post-year-end adjustments, be it a rebate or tax bill. From a national perspective, this change will enable HMRC to provide a significant amount of data to the Department for Work and Pensions (DWP) which can then be disseminated accordingly. "

With Universal Credit set to be introduced in October 2013, RTI will provide the DWP with employees' actual earnings and personal information which can then be used to adjust benefit claims. At the same time information can be used by the Office of National Statistics to create a comprehensive picture of taxation in the United Kingdom. HMRC will be working in conjunction with employers to accurately match incoming data to taxation records on file, with employers being tasked with providing National Insurance numbers as well as personal information such as gender and date of birth, verified by a passport or birth certificate. Furthermore, every member of staff employed by a firm - including those on leave - will be included in the reporting, so that those employees not recorded will ultimately have their records with that employer closed by HMRC.

Stuart adds, " It is very important that employers note the full and correct name of their employees as incorrect entries will mean the submission is rejected, and penalties may follow. For example, someone may be called Jon in the office, but their passport states Jonathan. Likewise, someone with a popular name like Ruby, might actually be called Robina. Checking these facts before submitting any forms will save a lot of hassle in the long term. "

HMRC will be capturing this information in two ways, depending upon the size of firm. For businesses with an excess of 250 records, an Employment Alignment Submission (EAS) must be sent to HMRC when requested. For firms with fewer than that number, they can send an EAS or use the First Payroll Submit (FPS) to align their records. Once the EAS is accepted, the employer will have moved to RTI.

Stuart appreciates that it will be a significant process for employers to undertake. He says, "We advise businesses to ensure that they are taking steps now in preparation for the move in April; we recommend that business who use an agent should contact them to confirm that they are ready for RTI. Meanwhile, those businesses who operate an internal payroll system should ensure they have access to RTI enabled software. "

The implications for business are however, far wider than simply the process of RTI. Stuart suggests employers look at all aspects of the business. He says "For the first time, employees will see a direct correlation between payroll data and any state benefit they are entitled to, therefore employers may have to look at improving payroll accuracy to avoid queries from their staff over payment fluctuations. HR teams will have to understand how these changes impact new starts and leavers, so that they meet reporting deadlines. "

Hall Morrice can offer practical advice and assistance during this transition as well as handling payroll preparation completely.

Hall Morrice, founded in 1976, is one of Scotland's leading independent firms of chartered accountants and has offices in both Aberdeen and Fraserburgh. Based at 6 & 7 Queen's Terrace in Aberdeen, Hall Morrice can be contacted on 01224 647394 or at

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