RTI (Real time information)
Will this affect me as a one man Limited Company, should I expect my accountant just to deal with it within the fee. What do I need to do to comply and protect myself?
Although you may not have any employees, one man Limited Companies will be affected by RTI. The reason is that as a one man Limited Company you are a director of your company. For the purposes of PAYE this means you are therefore an employee of the company, in the role of company director, which is within the scope of RTI.
RTI is replacing the year end PAYE P35 Employers Annual Return which details employees tax, NI and statutory payments made during the tax year. With RTI this data must instead be submitted to HMRC on a monthly or quarterly basis throughout the year.
A key point is that this affects PAYE submissions only. It has no impact on dividends or other payment arrangements.
The main benefit of RTI is that it will eventually make the PAYE system easier for employers and HMRC to manage and will be far more accurate. All this should mean that HMRC have better information to help them review employee’s income information and ensure they are paying the right amount of tax and NI in any tax year. The other key point is this will also mean that any benefits payable to employees are reported to HMRC as you go, and any tax codes can be amended accordingly. The majority of employers and pension providers will start using this system from April 2013 and all employers must be using it by October 2013.
The biggest issue with RTI is the sheer volume and frequency of administration.
For a one man Limited Company the easiest way to administer this is to plan all 12 of your salary payments in advance. This makes it much easier for you to then simply submit your pre-calculated PAYE figures on time and therefore avoid any late penalties. As the current late penalty proposals are for a minimum of £100 per week for small companies these are clearly best avoided.
If you have an accountant, agree with them what your monthly salary amounts across the year will be – and stick to them. Varying your salary without telling your accountant, making ad hoc cash withdrawals and so on are what may potentially cause problems. Ideally your accountant should be able to deal with your RTI administration for you as part of their regular service.
In practice, with good planning, the majority of one man Limited Companies who have an accountant will not experience much change when RTI rolls out.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.