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Experian fully supports the move to submitting Real Time Information (RTI) to HMRC and all versions of Experian Payments Gateway are fully compliant with RTI.
RTI - Real Time Information
The information that is referred to as RTI (Real Time Information) is similar to the tax information that is currently submitted annually, telling the tax office what pay and deductions have been made for each employee. However instead of having a special process just for tax purposes and submitting a full year’s details after the end of the tax year, the RTI process will be integrated into the employers’ payroll process. This will mean that employers will submit details to HMRC for each pay run throughout the year, either at the same time as the payroll or before it.
The details reported include the actual payment made to each employee, and how that pay is made up together with any deductions, before and after tax, similar to the information on the employee’s payslip. This information allows HMRC to calculate the appropriate tax codes for employees so that the employer can deduct the correct amount of tax. The advantage of collecting this information with each payroll instead of only at year end is that over time, HMRC will be up to date and able to make more changes in-year rather than having to wait until after the end of the tax year, meaning fewer under and overpayments for employees.
As well as improving the accuracy of the information that HMRC have and allowing them to collect the appropriate tax at the right time, ultimately it will also remove the need for a number of the forms that employers currently have to submit and thus streamline employment procedures.
Timescales for RTI
Submitting RTI will be mandatory for all employers from 2013.
The timetable for on-boarding employers to RTI is as follows:
- Pilot started April 2012, and has been ramping up throughout the year
- Majority of employers upgraded by March 2013
- Remainder by October 2013
Your payroll software provider and the HMRC should have been talking to you about when your organisation needs to start submitting RTI.
The RTI will be generated by the Payroll software. Payroll software suppliers are upgrading their products to allow them to produce the required information. If your payroll software supplier has not advised you of this yet, we recommend that you to contact them to find out how they will service this requirement.
RTI will be submitted to HMRC, using the online route currently used for annual filing. For larger employers and bureaux this will be EDI whilst smaller ones may use the Government Gateway.
Note: This is an interim arrangement which will be replaced by a strategic solution in which employers who pay employees through Bacs will send RTI together with the Bacs Payment file. EDI will remain available until at least April 2014.
Experian Payments Gateway and RTI
In order to enable HMRC to corroborate the RTI sent, the Bacs scheme member banks have agreed that HMRC will receive confirmation when a payroll payment has been made. To do so, they have agreed that a 4 character reference will be included in field 7 of the payment instruction in the Bacs file for payroll payments. Experian Payments Gateway will pass this reference to Bacs with the rest of the file.
The payroll software will use this 4 character reference, along with other data about the payment made, to create a 64 character cross reference that will be submitted to HMRC with the RTI. The 64 character cross reference will then be reproduced by Bacs as part of the payment and sent with confirmation of payment to HMRC.
The cross-reference will enable HMRC to corroborate the tax data returned against the payment made to the individual. This will assist DWP’s administration of Universal Credit and HMRC’s administration of the PAYE. Data about match rates may be used, in conjunction with other information, to inform compliance activity.
The 4 digit cross reference
The reference will be generated by the payroll software and included for each payroll payment in the payroll file. It is a random four character code consisting of a slash followed by 3 more characters from the following set 0-9 A-Z /-. that is, all the Bacs allowed characters except & and space.
It will need to be transmitted in field 7 of the std18 file that Experian Payments Gateway sends to Bacs. In Experian Payments Gateway, field 7 is labelled “Numeric Reference”. It is not validated except to ensure that it contains valid Bacs allowed characters.
Ensuring that the 4 digit cross reference is transmitted
All versions of Experian Payments Gateway can transmit the 4 digit cross reference.
What you need to do to ensure that the 4 digit cross reference inserted in the file by the payroll software ends up in field 7 depends on the format of the files from your payroll software.
If you import std 18 files from your payroll software, the payroll software will put the cross-reference in field 7 and Experian Payments Gateway will import it. You do not need to do anything in Experian Payments Gateway.
If you import any other sort of file from your payroll software, the payroll software will put the cross-reference in each record. In this case you will need to amend the custom file format that you use to import the file, to ensure that the cross-reference is imported, from wherever it appears in the record, and placed in field 7.
Some payroll software will be changing the format of their files when they include the reference, in this case you may need to select a different format or modify the existing one depending on the change.
Experian can provide guidance with this if needed.
Further information from HMRC
For full information about what you need to do to generate and send your RTI see the HMRC website here.
If you would like further information about Experian Payments Gateway, please complete your details in the form and someone will be in touch with you to discuss your requirements. Alternatively download the Experian Payments Gateway brochure.