Managing Your Cash Flow

Operating PAYE in real time: What you need to know about RTI

4 min read

22 February 2013

Business leaders are widely unaware of the changes to the PAYE system. What will it mean to operate PAYE in real time?

Despite the major changes to the PAYE system coming into effect on the sixth of April this year, one in three SMEs have no knowledge of Real Time Information (RTI) or what it means for business. So, what does it mean to be operating PAYE in real time?

Each time an employee is paid, the employer keeps their payroll information. PAYE will still operate in the same way, but employers will have to submit payroll information to HMRC on or the day before they pay their employees.

To help you on your rise to real time, the Full Payment Submission (FPS) was created. This payroll software will generate the new reports needed to submit payroll information online. 

This includes:

  • The amount paid to employees; and

  • All deductions, for example, income tax and national insurance contributions

The Association of Accounting Technicians began their survey of 1,000 decision makers, managers and directors of SMEs in January this year. According to their findings, one in three SMEs don’t know about the changes to the PAYE system, or even the introduction of RTI.

AAT director of the professional development, Adam Harper, commented on the new research findings: “The lack of understanding about RTI clearly indicates not enough has been done to guide small businesses through the massive changes to PAYE which will have a big impact on time, resource and spend for small enterprises. It’s a distressing situation given April is fast approaching.”

The lack of understanding about these major changes also revealed that 30 per cent of those businesses that were aware of RTI, didn’t know if their current software or payroll could cope with the changes.

With HMRC issuing penalties for those businesses that don’t comply, it may come as no surprise that 35 per cent of SMEs are concerned about the cost involved. A further 30 per cent are worried about how time consuming it will be to implement.

Half of SMEs also believe that the complexity of the tax system favours big business. HMRC needs to take responsibility and address those organisations suspected of tax avoidance to ensure a more level playing field – putting a stop to “sweetheart” deals.

Almost half of SMEs were quick to explain that start-ups and entrepreneurs face major difficulty within the UK to get their business ideas off the ground because of the lack of capital made available to them. There is much work to be done to raise awareness of lending and cashflow initiatives so that entrepreneurs are made aware of the opportunities and feel supported.

“We need the small business community to feel that the UK government is doing more to incentivise and stimulate their growth; especially with many small businesses feeling disheartened with the growing number of high profile tax avoidance stories. With nearly half of SME enterprises unaware of the finance lending initiatives available to startups and entrepreneurs, so much more needs to be done to educate them about their options,” Harper continued.