In a move that should help to reduce year-end penalties for employers, HM Revenue & Customs is to change its Pay As You Earn system to handle tax and other deductions on a monthly rather than annual basis.
HMRC's new 'Real Time Information' approach will mean that tax and deductions data is transmitted to it each time an employee is paid. This means that employers will no long be required to provide information using forms P35 and P14 after the year end or to send in the P45/46 document when employees start or leave employment. The phased introduction of RTI will begin in April 2012 with an initial pilot. HMRC hope to increase the number of employers joining RTI during fiscal year 2012/13 if the scheme is successful. Accountancy firm James Cowper welcomed the move, saying that it would no longer unfairly punish employers with unknown systematic errors in their PAYE payment systems. Nick Butler, head of JC Payroll, the company's dedicated payroll bureau, said: "This is a sensible decision from HMRC and will be a relief to many business owners. Together with the notifications from HMRC that already exist when a late payment is made, businesses now have every opportunity to avoid substantial and unexpected year-end penalties."