Published on Tuesday, April 19, 2011
RTI (Real Time Information) refers to the submission of employee pay related information at the time of payment rather than at year end. Her Majesty's Revenue and Customs principle aim of the move to RTI is to support the introduction of Universal Credits in October 2013, a government drive that is only possible if pay related information is available in real time.
The current PAYE system relies on employers assigning correct tax codes and deductions for their employees during the year and then submitting this information at year end. RTI aims to collect information about Tax and other deductions each time employers run their payroll. This information would be submitted electronically to HMRC at the same time the employees are paid.
Initially RTI will be delivered via the Government Gateway or
the EDI channel. 
However, there is a longer term goal to make this into a one step process whereby both the RTI file and the payment file are delivered simultaneously through Bacs in a combined file:
Timescales for the combined file through Bacs have not yet been divulged although 2015/2016 has been mooted. Until then, the EDI channel will be available as an alternative to the Government Gateway.
92% of employees receive their salaries via Bacs. By appending the RTI data to the payment, the accuracy of the pay related information will be improved with less opportunity for incorrect data being passed to the HMRC. In addition Bacs is a tried and tested, highly secure connectivity model which provides a cost effective delivery channel for re-use.
Initially the link between RTI and the payment will be achieved through a 'hash' accompanying each separate file whilst longer term this link will be seamless when a combined file is sent through Bacs.
All employers will be expected to generate the RTI submission at about the same time as they send the payment.
Employers who currently pay their employees by Bacs, either using Direct Bacs software or via a Bacs Bureau, will need to generate a hash to link the RTI file to the payment file.
NOTE: Only employers who submit to Bacs either directly or indirectly using a Service User Number will be required to generate the accompanying hash. All other payment methods including internet banking, cash, cheque, CHAPS and Faster Payments are 'out of scope' for the hash but will still need to generate an RTI file.
The employers who pay by Bacs (with a SUN - Service User Number) will need to generate a hash to accompany the RTI submission and a 4-digit reference to accompany the payment submission. This is mandatory and forms part of the new legislation. Using pre-determined data from the payment submission, the employer's payroll solution will generate a unique hash which will accompany the RTI file via the Government Gateway or the EDI channel. HMRC will then be able to validate that RTI file against a 2nd hash generated from the payment file itself using the aforementioned 4-digit reference.
The main driver is the introduction of Universal Credits in October 2013 but there are additional drivers around efficiency for both employers and the government which would also make the introduction of RTI beneficial.
HMRC is planning on piloting the 'interim' solution from April 2012 with migration en masse commencing in April 2013, subject to the successful completion of the pilot. It is expected that all companies will be submitting RTI by the end of 2013 with smaller companies being moved onto the new system last.
The current timeline published by HMRC can be found below:
All employers will be required to submit RTI data by the end of 2013. This is a mandatory requirement and is specified in draft legislation which was issued during November.
Employers will still be responsible for all tax deductions and calculations but instead of submitting this data once a year to HMRC, they will be required to do so at the same time as their payroll run, be that weekly, fortnightly or monthly.
Employers will need to ensure that their solution suppliers for payroll and payments are able to support RTI and upgrade their systems accordingly.
Data quality is paramount so employers are being encouraged to ensure their existing employee data is clean and that their processes for collecting starter information are in place. There are four key pieces of data that are used to identify employees:
Once the initial changeover has occurred, this is likely to reduce time spent on payroll each period with more and more tax related forms being submitted via RTI over time. End of year returns will become a thing of the past.
The RTI initiative is designed to benefit both employers and HMRC and, once implemented, end of year processes will be significantly reduced and less painful all round.
Click here to see all related articles on HMRC RTI.
Further updates can be obtained from the HMRC website using the following links:
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