Is Real Time Information a real problem worth panicking over? Naturally our clients processing payroll via MiracleLite, the payroll system developed for Microsoft Dynamics NAV some 15 years ago will have no problem fulfilling its role. Is it likely to be that straight-forward?

Real Time Information (RTI) will affect every employer and pension provider in the UK. Its aim is to provide two main benefits: improving HMRC efficiency and providing a key part of the welfare reform; Universal Credit. At the moment, all attention is on the former and HMRC have until October 2013 to get it up and running (although anticipated that most companies will be using it from April 2013).

The advent of RTI will mean employers and pension providers telling HMRC about tax at the time, or before, payments are made. Essentially it’s a year-end submission every time the payroll is run with the addition of the BACs payment reference where applicable. Payroll systems already manage the year end submissions so this is pretty much about increasing the frequency rather than introducing a whole new process. Of course, for payroll departments it’s a change in working processes but to suggest it needs a massive IT investment would be rather misleading.

Mark Holden, the RTI programme director at HMRC described it as evolution rather than revolution as far as PAYE software application is concerned, commenting in The Guardian: “It is incremental for them [software providers], but I don’t want to underplay the amount of work involved.” Which is possibly a pre-justification of the IT costs HMRC themselves will incur through the process, although in fairness they probably have an awful lot of interfaces to work with.

Although it is interesting that Mark Holden’s view (and mine) is not shared by the Institute of Payroll Professionals in their report to parliament: “Real Time Information will cost employers through their payroll software providers’ copious amounts of money to change the current end of year reporting.” This is probably a completely different topic as to why the government is frequently led to believe that IT = massive spend (have I mentioned our water company who invested a fraction of the typical water company spend when they selected Dynamics NAV and not only passed a successful IT audit, also have one of the lowest leakage rates in the UK? Look here if you’re interested. Good IT does not mean millions of pounds of investment, actually the reverse.)

Employers seem to be reasonably comfortable, judging by the positive volunteering to the pilot scheme. Although naturally those volunteering are those who probably have the internal teams to work out any issues but we can still be grateful for their pioneering spirit!

At this stage of the pilot, it is the collaboration of the employers who will provide the information and the developers of PAYE software that are essential to success and I share HMRC’s confidence that this will all work reasonably well. The bigger challenge comes from the payments side, the linking between net payments actually made and what was declared through the payroll. This information should come from the BACs software, moving away from the tried, tested and proven Government Gateway to a reliance on the banking industry’s software applications. Excluded from this are internet banking payments as these are viewed slightly differently from BACs. This won’t be a problem for the businesses concerned as at the moment they’re not being asked to provide the data at all; it is potentially a big concern for the government as it could impact on the introduction of the Universal Credit welfare reform. Is this our concern? No doubt there will be a rethink at some point which will demand changes from the banking software to provide the information; which will cost the banks a fortune; which will be passed on to us . . .

It is our experience and our clients’ frustration that every time we interface the Dynamics NAV BACs output to the client’s banking system work is required. Not an enormous amount (although the new internet based versions are proving more of a struggle as the logic is more complex than the traditional flat file interfaces that are generally a field mapping exercise and consideration of error handling); however, the fact that every BACs interface is slightly different does not bode well for ease of data consolidation when it reaches HMRC.

In summary, employers need to make a small change to operational processes to submit information more frequently than has been the case. The hope is that we’ll all benefit in the short term by a more efficient HMRC. The cost to ensure that the payroll systems can cope is probably insignificant compared to the costs that could well rack up when the issue of collating and matching the payment data arises. For anyone wanting help and advice on the payroll side, we’re happy to help. For anyone wanting to voice concerns about the BACs side, we’re happy to sympathise but we’re all in the hands of the banks.