HMRC to extend small business PAYE real-time reporting exemption until April 2014

Out-Law News | 18 Jun 2013 | 1:16 pm | 2 min. read

Small employers will have an additional six months to prepare for the real-time reporting of pay as you earn (PAYE) information to HM Revenue and Customs (HMRC), the Government has announced.

Businesses with 50 employees or fewer will not have to report salary and other payments made to their employees in 'real time' under the Real Time Information (RTI) PAYE reporting scheme until the end of this tax year, it has said. Until April 2014, these businesses will continue to be able to provide this information to HMRC on a monthly basis through the new scheme.

Incentives expert Lynette Jacobs of Pinsent Masons, the law firm behind, said that HMRC had recognised that smaller employers may need longer to adapt to the new system.

"This 'safety net' applies only to small employers who pay staff manually – perhaps weekly or fortnightly – typically passing their records to a payroll agent to process the payroll for the month and produce payslips on the last paydate of the month," she said. "The concession – and now its extension until April 2014 – is evidence of HMRC's recognition that employers who operate in this way may need longer to adapt to reporting PAYE in real time."

"It is to be hoped that the extension of the concession will further encourage small employers who have not already done so to start operating RTI now, before the automated penalties are implemented," she said.

Jacobs added that HMRC's approach to the implementation of RTI by small businesses had had "positive results". According to its figures, more than 83% of small-to-medium sized employers have already begun to operate the new system, while 77% of 'micro'-employers with ten employees or fewer were also now reporting in real time.

According to HMRC, more than 1.4 million employer PAYE schemes have begun reporting in real time since the new system began in April. Under RTI, employers and pension providers must report the deductions and payments they make to HMRC at the time they are made, rather than after the end of the tax year as was the case under the previous system.

HMRC announced in March 2013 that employers with fewer than 50 employees that find it difficult to report every payment in real time would be able to send this information to HMRC on a monthly basis, providing that this was no later than the end of the 'tax month' on the 5th of the following month. This temporary relaxation was previously due to run until 5 October 2013, but by extending it until 5 April 2014 HMRC hopes to avoid small employers having to change their reporting processes part of the way through the tax year.

Most large employers have been given an RTI start date by HMRC, falling between July and September 2013. HMRC said that it would work with businesses with specific difficulties or unusual circumstances over the coming months to ensure that all employers would be reporting in real time from April 2014.

"This is the biggest reform of PAYE since its introduction nearly 70 years ago and we are brining the system into the 21st century," said David Gauke, Exchequer Secretary to the Treasury. "The transition is going well, and the vast majority of employers are not reporting their PAYE information in real time, meaning that HMRC's records are becoming more accurate and up-to-date."

"This is all good news, but we will continue to listen to and work with businesses to ensure that all employers are reporting in real time by April 2014," he said.