From it's introduction, PAYE replaced the existing once a year tax payments system which ran in conjunction with self assessment and provided the basis for payroll as we know it today with weekly and monthly calculations, tax held at source and a once a month submission of tax payments to be provided to the Inland Revenue. In turn, this freed up funds greatly needed to continue the war effort.
Following WW2, little changed with the PAYE system which meant that despite payments of company wide PAYE tax being conducted on a monthly basis, the details of the bulk tax breakdown itself were only submitted annually in the form of the employers P35 submission. For the HM Revenue & Customs, this often led to problems matching up payment submissions, and being unable to deal with incorrect taxation at the time the error was made, often leading to costly fines for companies following year end.
Fast forward to the 21st century, and given the advent of the internet and a new crisis in the form of global recession, it was clear that something needed to be done. Following on from initial groundwork of electronic submission at the latter half of the 20th century, plans for RTI submissions of all payroll data were laid out to maximize the efficiency of the HM Revenue & Customs. This came at a time when many European countries had already surpassed Great Britain in their payroll reporting having adopted e-filing successfully many years previously.
Essentially, RTI would lay down a framework that could be used by multiple government agencies to obtain details of pay & taxation on a real time basis, rather than the archaic once a year system, and to fall in line with European technology progress on tax payments and reporting. From a HM Revenue point of view, this would be invaluable to deal with problems on a proactive basis with both employers, and employees. The new system would also be beneficial to speeding up benefits claims, and on the flip side ensuring that benefit cheats can no longer hide behind the current outdated system and to curb tax evasion.
On the contrary, some have argued that such measures are a new sign of a 'Big Brother' Britain. Given that the tax system is monolithic, it is hard to argue that such change is not needed, especially given the disarray that the HM Revenue & Customs has found itself in over recent years. Such changes to the tax system will no doubt have a huge benefit for all involved, although many are pessimistic that such a large scale project won't be without it's fair share of issues given previous attempts at modernizing the system by the HM Revenue & Customs.
Needless to say the changes which come in to effect in April 2013 are almost here which highlights recent worrying statistics that many businesses are either ignoring, or are unaware of the changes following HM Revenue efforts to send out literature to companies across the UK regarding it's introduction. Many are unaware of what information will need to be corrected on their systems, and how they will need to make new submissions on a monthly basis to reflect all basic employee details, and a full breakdown of pay, tax and other deductions. Such statistics are worrying given the HM Revenue approach of fining companies, with daily compounded interest for not following compliance. This begs the question, how does your company compare in it's readiness of RTI?
For a payroll company that is RTI ready, visit www.avantpayroll.co.uk for more information on RTI and what you will need to do to ensure that you stay on the right side of the HMRC.