RTI: Really terrible idea? by David Thornhill, MD of Simplicity

RTI: Really terrible idea?

by David Thornhill, MD of Simplicity

With HMRC’s Real Time Information (RTI) pilot initiative launched in April, many recruiters remain concerned about the impact it will have on their business, once it comes into action from April 2013.

The proposition at the heart of this ‘game-changer’ aims to improve and update the PAYE records as and when changes occur, through RTI, rather than at the end of each tax year, in order to reduce errors in the tax system by keeping up-to-date information about employees’ incomes, which in turn will ensure that the correct deductions are made.

At first hearing this all makes sense, as it helps employers and recruiters ensure that their staff are paying the right amount of tax and National Insurance contributions, and that these records are accurately processed throughout the year, instead of at the end of the tax year.  However, the impact it will have upon recruitment businesses – particularly SMEs – will be noticeable, as it will become disruptive by undoubtedly affecting their cash flow, as they need to spare the transitional costs to switch to this new RTI system.

This is a concern, because those small employers who run their own payroll may not be set-up to provide this information to HMRC on a regular basis when each employee is paid, particularly if they’re enrolled into ‘pay when paid’ contracts; the threat of facing financial penalties and inspections if this isn’t implemented correctly puts additional pressure onto these businesses.

It’s not just our customers who have their concerns about RTI; research from leading HR services company NorthgateArinso found that nearly two in three (63.9%) companies believe that HMRC should phase in RTI over a longer period and almost 70% said they were concerned about RTI.  This illustrates that the industry is still not ready for the legislation to come into action in 2013 and that more support needs to be provided.

We work with different sized recruitment agencies across the UK, so understand that new government legislation can cause difficulties in quickly understanding and implementing new payroll processes.

This is why our back office support service can help to ease the burden of adopting RTI into the current payroll system.  The IT changes involved in order to make RTI work may lead to significant additional costs and new processes to be implemented; our full payroll service includes everything from calculation through to processing, and BACs paid directly to temps and contractors every Friday, so we worry about meeting the RTI each payday, leaving recruiters to focus on running their business.

Some recruitment agencies have taken on additional payroll staff in anticipation of RTI, in order to provide additional support to submit this information when the time comes.  Larger businesses will be particularly affected, as they have a bigger workforce, but it will be the smaller businesses and recruitment agencies that will mostly feel the impact on their knowledge and cash flow.

If you’re unsure about how RTI will affect your business, our payroll experts would love to hear from you and discuss the right support for your business. For more information visit our website www.simplicityinbusiness.com and please feel free to contact us for a no obligation consultation on 01594 546585 or sales@simplicityinbusiness.com.