1. What is Real Time Information (RTI)?
● most significant change to Pay As You Earn (PAYE) since its
introduction just after WW II
● from April 2013 employers will receive an invitation to join RTI
●will advise the date upon which the employer needs to submit an
Employer Alignment Submission (EAS) or their first Full Payment
Submission (FPS), to HM Revenue & Customs (HMRC).
●EAS will normally be required only where the PAYE scheme has
250 or more employees
There is no change to the way in which tax or national
insurance is calculated – this is simply a change to the
reporting requirements

2. So what is the current reporting procedure?
● employer runs a payroll and produces employee payslips
● employer makes payment to the employees
●
on or before 19th of each month the employer pays tax and NI
(concession if deductions are under £1,500)
●
on or before 19th May each year the employer submits tax year
end P14s and P35 returns
So until receipt of the P14s and P35 HMRC has no way of
validating that the employer has made correct payments of tax
and national insurance during the tax year

3. New RTI procedure
●FPS is to be submitted every time anyone is paid (monthly,
weekly, 'ad-hoc')
●first FPS must include year to date details for all employees paid
during tax year including leavers
● even where an employer has sent an EAS first FPS must still
include all employees
● P14 and P35 not required for the year an employer joins RTI
●FPS data submitted about each employee will be used to
calculate how much an employer must pay to HMRC for each tax
month
HMRC no longer need to wait until the end of the tax year to
discover whether or not the employer has paid over the
correct amount of tax and national insurance

4. Starters & Leavers
● form P46 no longer required for new starters without a P45
●however requirement to ask all new employees a series of starter
questions, similar to those on the form P46 including the same P46
statements A, B and C, and student loan question establish the
correct tax code and make student loan deductions
●in other words, employers will need a new starter
questionnaire not to dissimilar to the current P46 – see
www.hmrc.gov.uk/forms/starterchecklist.pdf
●no longer a need to submit a P45 (part 3) or P46 to HMRC as
new starter details will be included in the FPS
●similarly leaver details will be included on the FPS instead of
submitting a form P45 to HMRC however, employers will still be
required to give departing employees a form P45

5. Who should be included in the FPS?
●P38A supplementary return not required as employers will include
all payments in FPS
●i.e. under RTI employers will have to tell HMRC about
payments of earnings to all employees, even where an
employee earns less than the Lower Earning Limit
●under 16s do not need to be included in an FPS unless their
earnings exceed the income tax personal allowance – see also
http://www.hmrc.gov.uk/employers/p31-from-e13.pdf
●you should deduct PAYE tax regardless of an employee's age
once their earnings exceed their personal allowance

6. On or Before
●employers will be required to submit a FPS 'on or before'
payment is made to employees
●could be problematic, particularly for employers who do not
conform to the regular weekly, fortnightly, or monthly payroll routine
● exceptions where reporting 'on or before' will cause difficulties in
'a small number of cases', or for 'notional payments' – see
www.hmrc.gov.uk/rti/on-or-before.pdf
● will include payments which meet all of the following conditions:
✔ made to employees for work done on the day of payment
✔ made non-electronically (e.g. cash or cheque)
✔ made at a time or place where it would be impractical for it to be reported
‘on or before’ the time of payment
✔ where the employer cannot know how much the payment will be in time to
report the information in advance of the payment being made

7. The Employer Payment Summary (EPS)
●where there have been no payments to any employees in a tax
month EPS showing 'No payment due as no employees or
subcontractors paid in this pay period'
●
within 14 days following the end of the tax month i.e. 19 th of
month
●for non-submission HMRC will specify an amount due for that
month, and pursue payment of same
●where the employer has claimed an advance of statutory
payments

8. EPS will include ...
● 'No Payment for Period' indicator and dates from and to
● period of inactivity from and to i.e. notifying a future period of
inactivity
● value of advance received from HMRC year to date (previously
included in P35)
●value of SSP, SMP, OSPP, SAP, ASPP, and NIC Compensation
on SMP, OSPP, SAP, ASPP year to date
● CIS deductions suffered year to date
● value withheld under NIC Holiday scheme

9. So what will not change using RTI?
● the way tax and national insurance are calculated
● payment dates to HMRC
● providing employees with P60s at tax year end
● preparing a P11 deductions working sheet
●reporting a change to HMRC e.g. updating employee's name or
addresses for HMRC records
● HMRC Data Provisioning Service (DPS) and EDI outbound
message services (employers will still be able to choose how they
receive coding notices)
● filing monthly returns due under CIS arrangements

10. FPS will comprise ...
header date including:
● HMRC Office Number
● Employer PAYE Reference
● Accounts Office Reference Number
● Tax Year
● Self Assessment Unique Taxpayer Reference (UTR) or company
tax reference

11. for each employee:
● national insurance number
● title, surname or family name, forename or given name
● initials, second forename or given name
● date of birth
● current gender
● address and UK postcode and foreign country if not UK
● payroll number
● irregular employment pattern indicator

12. ● pay frequency e.g. 'w1' weekly or 'm1' calendar monthly
● payment date, tax week number, tax month number
● number of earnings periods covered by payment
● aggregated earnings indicator
●number of normal hours worked i.e. “A” – up to 15.99 hours, “B” -
16 to 29.99 hours, “C” - 30 hours or more, “D” - other
● tax code, week 1 / month 1 indicator
● BACS hash code
● on strike indicator
● unpaid absence indicator

13. ● taxable pay in this period
● tax deducted or refunded
● student loan deduction
● pay after statutory deductions
● benefits taxed via payroll
●employee pension contributions paid under a 'net pay
arrangement'
●employee pension contributions not paid under a 'net pay
arrangement'
● deductions from net pay
● non tax or national insurance payments

14. ● year to date values for above, plus
● statutory sick pay
● statutory maternity pay
● ordinary statutory paternity pay
● statutory adoption pay
●additional statutory paternity pay, and if there is any additional
statutory paternity pay …
● the partner's national insurance number
● partner's surname or family name
● partner's forename or given name
● and partner's second forename or given name

15. ● national insurance category letter
● scheme contracted-out number (SCON)
● director's national insurance calculation method
● week of director's appointment
● gross earnings for national insurance this period and year to date
● employee contributions payable this period and year to date
● employer's contributions payable this pay period and year to date
● earnings year to date within each NI band

16. additional for new starters:
● start date
● starter declaration statement (“A”, “B”, or “C”)
● student loan indicator
● passport number
● residency information about living in UK or overseas
● European Economic Area citizen indicator
● EPM6 (Modified) scheme indicator

17. additional for leavers:
● date of leaving
● and payment after leaving indicator

18. additional for last FPS in the tax year:
● final submission for year indicator
● employer's contracted-out number (ECON)
●and responses to the familiar P35 questions such as “did you
made free of tax payments to any employees?”
●and some new ones such as “is this the last report for this PAYE
scheme because it is closing?”

19. In due course the HMRC system will be aligned with that of
the benefits agency so that a closer control over benefits
payments can be achieved by ensuring that benefits go to
those with appropriate qualifying earnings.

20. RTI & BACS
● employers who make payment via the bankers automated
clearing system (BACS) under their own Service User Number
(SUN) will need to include additional information in the BACS
payment file
● four character entry in Field 7 (currently spare) consisting of an
initial '/' to identify it as an RTI payment, and three random
characters (which will be generated by the payroll software)
● RTI submission to HMRC will also include a cross-reference (or
'hash') calculated using this Field 7 reference, plus other data from
the payment file
● when BACS process the payment, they will use it and other
information in the payment file to re-create the cross-reference
sent to HMRC

21. HMRC will then match the cross-reference sent from BACS
with the information sent by the employer, so it will be
possible to match individual payments into employee bank
accounts with the payslip value reported under RTI, and more
importantly, investigate those which do not.