Real Time Information (RTI) is being introduced to improve the operation of PAYE. It will make the PAYE system easier for employers and HM Revenue & Customs (HMRC) to operate, and employees will receive information more quickly. Using RTI, employers and pension providers will tell HMRC about tax, National Insurance contributions (NICs) and other deductions when or before the payments are made, instead of waiting until after the end of the tax year.

Under RTI, employers and pension providers are not required to complete a form P46 and send it to HMRC when an employee does not have a P45. However, they will need to obtain the P46 information from the employee and use it to complete the starter information which will be sent as part of the RTI payment submission, with details of the employee’s first payment, when the payroll is run.

Using RTI will also mean that employers and pension providers will no longer need to complete an end of year return (P35 and P14) or P38A supplementary return, as they will tell HMRC about all payments made each time their payroll is run.

At the year end employers and pension providers will be expected to:

o – indicate on their last payment submission on or before the 5 April that this is the final submission for the tax year

o – provide each employee and pensioner with a form P60

o – complete and file any forms P11D and P11D(b) due under the existing PAYE arrangements

A HMRC pilot of the RTI service has been introduced; however, it will not become compulsory for all employers until October 2013.