Small Talk: Heard of RTI? It might do you a lot of good…

Real-time information may require some investment but it will improve efficiency

All good things come to those who wait: while the introduction of real-time information (RTI) seems inevitably destined to prompt one of those IT meltdowns for which our public sector is so renowned, there are plenty of reasons why businesses should welcome the overhaul.

That's especially true for small businesses – and not only because HM Revenue & Customs (HMRC) has told employers with fewer than 50 staff that they do not need to fully comply with the new system until October. It offered that concession at the 11th hour last month after finally accepting the repeated warnings of small business groups who told HMRC their members had never heard of the new system, let alone got themselves ready for it.

RTI, for the uninitiated, is the reform of the pay-as-you-earn (PAYE) system that came into effect on Saturday, the first day of the 2013-14 financial year. It requires employers to report every single payment made to all staff at the moment it is made, rather than providing such data through a single end-of-tax-year PAYE return.

Why would small businesses welcome such a reform, which sounds like a shift to a more onerous reporting system? In short, because RTI, once up-and-running properly, should actually be much less onerous.

For one thing, the system will only work if employers' payroll systems are entirely electronic and make automatic online returns to HMRC each time that payments are made. That may require an investment in new technology for some businesses, but over time it should dramatically improve efficiency.

Moreover, the annual PAYE return process can be incredibly bureaucratic – HMRC's estimate is that it costs businesses £300m a year simply to administer. Worse, the final return often prompts an unexpected demand from HMRC for a reconciliation payment – and where employers have been getting deductions wrong for the whole of the previous year, these demands can be uncomfortably large.

It might also be possible for small businesses to use the introduction of RTI as an opportunity to simplify their payroll arrangements. The more frequently staff are paid, the more complicated real-time reporting becomes. A shift to, say, fortnightly or monthly payments, rather than weekly payroll runs, will reduce costs and eliminate mistakes (though employees will generally need to agree to the change).

To capture these benefits, employers need to ensure that their payroll systems can cope with RTI. For those using payroll software already, that means checking with the supplier and updating where necessary (or buying the software, for those still using paper-based administration systems). Importantly, employers also need to be absolutely sure that they have accurate and up-to-date data on all their staff – everything from date-of-birth details to national insurance numbers – but this should also improve other human resources administration.

The decision of HMRC to exempt the smallest businesses from RTI until October was the right one, and will have the happy side-effect of ensuring that they're not directly caught up if there is a catastrophic IT failure as the system goes live. The authority has also made it clear that there will be no penalties for late filing of PAYE returns under RTI until next April at the earliest, which gives all businesses a chance to get used to the new regime without being penalised for mistakes.

There are undoubtedly some complexities to be tackled in the transition to RTI, but it is not as if the current system is without confusion. Electronic reporting through RTI will get rid of the potential need for employers to file at least eight different HMRC forms, for example.

Will all small businesses now be ready to comply by October? Probably not, though ironically a systems failure at HMRC would do more to publicise the move to RTI than all of the Government's worthy attempts to keep businesses informed combined. But the delay should mean fewer small employers are caught out. And, over time, even those for whom RTI represents an unexpected shock stand to benefit.

We should, in other words, look forward to RTI (or at least to a time when it is successfully bedded down). Reforms like these invariably come with teething problems, but the hassle will be worth it in the end.

Green power company gets £100m injection

Alternative Investment Market-listed Greenko will today hold an EGM to formally approve a £100m investment in the company from the sovereign wealth fund Singapore Investment Corporation, a renowned infrastructure investor. SIC joins investors such as Standard Chartered and GE in Greenko, which produces power from wind, hydro and other clean energy projects in India. The company has also recruited Keith Henry, former boss of National Power, as its chairman. Greenko plans to use SIC’s money to raise production capacity at its hydro power facilities in northern India as it moves towards its target of being able to produce at least 1 gigawatt of power from all its facilities by 2015. Arden, its broker, points out that “execution is key” as Greenko rolls out its plans, particularly as delays on projects have disappointed investors in the past. Nevertheless, it is raising its price target for the stock, currently trading at 135p, from 227p to 266p.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own