1. I have received a leaflet from HMRC regarding RTI – what does this mean?
RTI stands for real time information. It is a system to be introduced in 2013 whereby employers provide HMRC with information regarding PAYE and national insurance each time an employee is paid. RTI will become compulsory for small employers in October 2013. The system is being brought in to make it easier to implement Universal Credits, which will replace the current benefit system from October 2013.
2. How does RTI differ from what happens now?
At present a nanny payroll is operated for the whole tax year, with nanny PAYE payments being made on a monthly or quarterly basis to HMRC. At the end of the tax year, a form P35, End of Year Return, is submitted electronically which contains information concerning all the employees during the tax year with details of the nanny payroll operated during that period. This is the only time that HMRC obtain the information regarding nanny pay. With RTI, HMRC will obtain the information each pay date. Where employers pay by BACS the information will be provided to HMRC as part of the payment process. However, most small employers do not pay their nannies by BACS (these are not the same as electronic bank payments) and an alternative system will be adopted for filing which will be submitted via the payroll software. End of Year Returns will no longer be required.
3. What difference will it make to me as an employer?
Taxing Nannies will have procedures in place to implement RTI and we will ensure for employers who use our nanny tax service, that it will have little impact. It will be more important for employers to supply the information regarding any changes to their nanny’s salary or payroll details on time and information concerning the nanny’s basic details such as address, national insurance number and date of birth will be essential to enable us to process the nanny payroll. HMRC will though be able to identify late payments of PAYE and National Insurance much more easily and clients who pay late are likely to receive demands for underpaid tax.
4. My nanny does not earn much – will it still affect me as an employer?
At present, an employer needs to register with HMRC if their employee earns over the lower earnings level for national insurance of £107 per week. The implementation of RTI combined with Universal Credits will mean that all employees will require to be registered with HMRC, regardless of the level of income.
5. What happens if I fail to register as an employer?
HMRC have already indicated that they will be clamping down on nanny tax avoidance and RTI will give them more information to be able to identify gaps where there are no PAYE deductions for a nanny. You will therefore run the risk of being investigated and being charged penalties for failing to register and interest and penalties on unpaid PAYE and National Insurance together with an additional penalty of 100% of the outstanding nanny tax.