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There will be few employers who don’t know what PAYE stands for. But what about RTI, FPS, EAS, EPS and EYU? These are terms that many employers are not familiar with, but over the next year or so these terms will come into common usage in what will be the biggest single change ever introduced to the PAYE system.

RTI stands for ” Real Time Information” and it commenced on the 6th April 2013. It will be compulsory for almost all employers and there will be penalties for compliance failures.

Under the present systems employers notify HMRC about joiners and leavers (usually by means of P45’s) and total monthly liabilities. At the end of each tax year annual return forms (P35 and P14’s) are filed providing details of each employee’s salary and deductions. The total liability for the year reported on the annual return forms is reconciled to the monthly payments reported.

Under RTI employers will need to electronically file a FPS “ Full Payment Summary” every time they make a payment to an employee. The FPS must be filed on or before the day the payment is made. There are just a few exceptions where HMRC allow a little more time where it is impractical to file until after the payment is made. In the usual situation where more than one employee is paid at the same time a single FPS is filed.
Large employers (those with more than 250 employees) will need to file an EAS “ Employee Alignment Summary”. The purpose of this is to align employee records held by the employer with those of HMRC.

Forms P35 and P14 will become things of the past because HMRC will have collected all the information they need from the FPS’s that employers will have filed. Forms P45 will be retained, so that new employers continue to get gross pay and tax paid to date figures for new joiners, but these forms will no longer be filed with HMRC.
Many small owner managed companies such as computer contractors pay salary infrequently. Some pay a single salary each March. These employers will need to file an EPS “ Employer Payment Summaries” where no employee payment has been made in a pay period. A single EPS can be used to notify HMRC that there will be no payments for up to 6 months.

Although there are no longer P35’s and P14’s to file, much of the information will still need to be included on the final FPS for each year. This information will include service company questions and whether P11D’s need to be filed.

A system of penalties is already in place for in year late payments of deductions. The penalty system will be extended to cover late filing of FPS’s but penalties will not be charged for the 2013/14 year except in the case of the final FPS which must be submitted by 19th April 2014. However a penalty will be avoided if an EYU “ Earlier Year Update” is filed before 19th May 2014.

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