UK: Big Changes To PAYE - RTI

Last Updated: 16 August 2012
Article by Anne Croft and Graham Rowlands-Hempel

Do you know what RTI is? It stands for Real Time Information.  If you are none the wiser, you are probably not alone. Many companies are only just beginning to realise what a huge change it will be.

In a nutshell, RTI requires all employers to send a return to HMRC every time a payment is made to employees, on or before the actual date of payment. So companies will need to send a return on the payroll date every month (or every week for some companies). But that is not all – companies will need to send another return whenever any other payment is made, such as a bonus, overtime, commission – and whenever an option is exercised or shares vest. There will be multiple returns.

Your colleagues in the payroll department will need to plan for this. New software will be needed, to cope with all these returns.  And new internal systems will be needed, to ensure that the payroll department is provided with information promptly. This will affect you, and your share plan administrators.

When is this happening?

It is in force now, but not for all employers. A pilot has been running, with 10 employers, since 6 April 2012, and 310 more employers are joining the pilot over the next few weeks. By 6 October 2013 it will be compulsory for all employers, but HMRC has power to add any employer to the pilot at any time, so you need to be ready now. They say there will be 250,000 RTI employers by next March.

Will there be penalties?

Yes, there will be penalties if returns are not filed on time. But more importantly, RTI will give HMRC the information it needs to charge penalties for late payment of tax. You may think this won't apply to you, because you always pay tax on time – but actually, there are probably times when it applies to most employers who run share plans.

Technically the due date for payment of PAYE is 14 days after the end of the tax month (in other words, the 19th of each month). Usually employers have no problem complying with this, but sometimes payments miss the payroll cut-off date. This quite often happens with share plans. It is normal practice for these payments to be picked up in the following month. In the past, that was not a problem – employers just had to make sure everything was in order by the end of the tax year. But in 2009 legislation for in-year PAYE penalties was introduced.

Initially HMRC was not able to enforce the penalty legislation in practice, because there was no mechanism to determine the amount of PAYE that companies should pay each month. But now HMRC will be able to use the information delivered under the RTI returns to check whether the right amount of PAYE has been paid each month, and to impose penalties for late payment, even where it is only one month late.

The problem with share plans

Share plans do not fit neatly into the PAYE system, because it was designed for payments of cash, from which tax can be deducted. They have been shoe-horned into the system, using the concept of a "notional payment" to describe a taxable event which could be anything from an option exercise to the expiry of restrictions on forfeitable shares. Employers often can't control when these events will happen, and they can't know the value of the shares – and therefore the amount of the notional payment – until after the events have happened.

We are concerned that employers may be penalised for making late RTI returns, and late payments, despite making every effort to comply with the system, simply because of the nature of share plans and the way they are taxed in practice. This seems unfair.

What can we do to help?

We have had several meetings with the RTI team at HMRC, and we have explained the problems faced by employers in connection with share plans. We have already achieved one success – the RTI regulations allow employers to make a single monthly return for notional payments under share plans, instead of having to make a separate return for each one. This return does not have to be made until the 19th of the following tax month – the same time as payment of tax is due.

That is very welcome, and will certainly solve a lot of problems. But some problems remain, especially where the payroll cut-off date is missed. We hope it will be possible to reach a practical solution which will avoid penalties in cases where there are good reasons for payments being carried forward to the next month – for example where leaver information needs to be transmitted to a SIP administrator before the taxable value of SIP shares can be calculated.

This article is intended merely to highlight issues and not to be comprehensive, nor to provide legal advice. Should you have any questions on issues reported here or on other areas of law, please contact one of your regular contacts at Linklaters.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.