Understanding the RTI Functionality
This topic discusses:
RTI benefits.
Tasks to be performed prior to RTI.
RTI process.
UK employers and pension providers can electronically submit Pay as You Earn (PAYE) deductions information to the HM Revenue & Customs (HMRC) as and when the deductions are made. HMRC introduced major changes to the process of making statutory returns for PAYE and National Insurance (NI), and transferring data between HMRC and employers. This is often referred to as Real Time Information (RTI). RTI reporting is mandatory for all employers as of October 2013.
RTI is a system introduced by HMRC to improve the operation of PAYE. The RTI functionality helps collect PAYE information more regularly and efficiently when employers submit their regular payroll submissions.
The following are some of the benefits:
As a part of RTI, employers and pension providers report all earnings and deductions made to an individual at the time payment is made to the individual, instead of reporting these figures only at the end of the tax year.
RTI reporting is an integral part of the normal payroll activity. When employers run their payroll calculations, the payroll software gathers the information required and reports it to HMRC.
RTI supports Universal Credits by simplifying and streamlining benefits into one payment. RTI provides the Department of Work and Pensions (DWP) with up to date information about a claimant’s employment income enabling them to calculate Universal Credits payments without the need for claimants to supply employment or pension income information.
RTI also removes the need to submit P35s and P14s at year end and simplifies the employee new starter and leaver processes.
RTI helps HMRC to respond more efficiently to errors, improves the accuracy of employee PAYE data, and enables efficient collection of outstanding PAYE and National Insurance Contributions (NIC) liabilities from employers.
Employers are required to perform the following key tasks prior to using RTI processing:
Data Improvement - This involves cleansing of existing employee data and is a key requirement before any RTI data can be submitted to HMRC. Employers are expected to ensure that the data they have on all current employees as of April 2013, is as accurate as possible. This data includes name, address, gender, date of birth, and tax code. To assist this process, HMRC alerts employers to any data discrepancies such as invalid NI numbers, or missing or incomplete biographical data.
Payroll Alignment - The HMRC requires all employers to go through a payroll alignment exercise before they start sending RTI payment returns. The employee data maintained by employers is likely to be more current than HMRC’s records. The alignment exercise updates HMRC records with the latest employee data from the employers. Each employer must provide an extract of all individuals who are employed within a particular PAYE scheme in the current tax year, including those who have left since the start of the tax year. This process needs to be run only once, prior to the first RTI returns.
The RTI process includes the following steps:
Employer Alignment Submission (EAS).
Full Payment Submission (FPS).
Employment Payment Summary (EPS).
National Insurance Verification Request (NVREQ).
National Insurance Verification Reply (NVREP).
Generating EAS
Perform the following steps to generate EAS.
Pay Entity Set Up - This is a one time activity and users need to verify the Pay Entity Set Up information before generating the EAS file.
Process FPS Details - You need to perform the following steps before generating the EAS file.
Update Employment Number RTI (GPGB_EMPMAP).
Process Starter Declaration (GPGB_STARTER).
Process RTI GBR - Once this process is generated, the user needs to validate the RTI Validation Report. The RTI Validation Report log reports missing information and classifies it as Error or Warning. If the message is classified as Error then the user needs to take appropriate action to incorporate the changes to ensure that mandatory information is included in the output file.
Users have the option to generate the file in the Trial or Final mode. The Trial mode can be used for validating the file structure and data items. The file generated in Final mode goes through validation of employee data with HMRC core systems.
Generating FPS
Perform the following steps to generate FPS.
Pay Entity Set Up - Users need to verify the Pay Entity Set Up information before generating the FPS file.
Run and Process Payroll - Users need to ensure that the payroll is processed before generating the FPS file.
Process FPS Details - Users need to perform the following steps before generating the FPS file.
Update Employment Number RTI (GPGB_EMPMAP).
Process Starter Declaration (GPGB_STARTER).
Report and RTI Preparation GBR - Once the payroll is processed, users need to run this process based on various run control parameters available. This is a mandatory process before generation of FPS.
Process RTI GBR - Once this process is generated, users need to validate the RTI Validation Report. The RTI Validation Report log reports missing information and classifies it as Error or Warning. If the message is classified as Error then the user needs to take appropriate action to incorporate the changes to ensure that mandatory information is included in the output file.
Generating EPS
Perform the following steps to generate EPS.
Pay Entity Set Up - Users need to verify the Pay Entity Set Up information before generating the EPS file.
Run and Process Payroll - Users need to ensure that the payroll is processed before generating the EPS file.
Report and RTI Preparation GBR - Once the payroll is processed, users need to run this process based on various run control parameters available. This is a mandatory process before generation of EPS.
Process RTI GBR - Once this process is generated, the user needs to validate the RTI Validation Report. The RTI Validation Report log reports missing information and classifies it as Error or Warning. If the message is classified as Error then the user needs to take appropriate action to incorporate the changes to ensure that mandatory information is included in the output file.
Generating NVREQ
Perform the following steps to generate NVREQ.
Pay Entity Set Up - Users need to verify the Pay Entity Set Up information before generating the NVREQ file.
Process FPS Details - You need to perform the following steps before generating the NVREQ file.
Update Employment Number RTI (GPGB_EMPMAP).
Process Starter Declaration (GPGB_STARTER).
Process RTI GBR - Once this process is generated, users need to validate the RTI Validation Report. The RTI Validation Report log reports missing information and classifies it as Error or Warning. If the message is classified as Error then the user needs to take appropriate action to incorporate the changes to ensure that mandatory information included in output file. Users have the option to generate the file in the Trial or Final mode. The Trial mode can be used for validating the file structure and data items. The file generated in Final mode goes through validation of employee data with HMRC core systems.
Generating NVREP
Perform the following steps to generate NVREP.
Pay Entity Set Up - Users need to verify the Pay Entity Set Up information before generating the NVREP file. Before running the NVREP process, users must first configure the location where incoming files from HMRC will be saved. This configuration may already be in place for your existing EDI infrastructure.
Process RTI GBR - Once this process is generated users have to validate the RTI Validation Report. The RTI Validation Report log reports details of whether the NINO will get updated or not.
Users have the option to generate the file in the Trial or Final mode. The Trial mode can be used for validating the file structure and data items. The file generated in Final mode goes through validation of employee data with HMRC core systems.