Can the introduction of Universal Credits impact on RTI?

Yesterday seen the trial introduction of Universal Credits, for a small number of new claimants in Ashton-Under-Lyme in Greater Manchester.

You may not initially think about the importance of the future of the benefits system but by October 2013 it will impact more than eight million people in the UK, our Payroll expert, Neilson Watts explores the impact it could have on employers reporting PAYE in real time.

So what are Universal Credits?

Universal Credits is the governments new single payment mechanism for people looking for work or on low incomes, it replaces benefits such as income based Jobseekers Allowance, Child and Working Tax Credit and Housing Benefit to name a few.

The claimant will have to apply online, and unlike the old benefit payment mechanism of receiving weekly or two weekly payments, Universal Credits will be paid once a month directly into a bank account with Iain Duncan Smith stating that “it’s much more aligned with how people receive wages, so it’s preparing people for the world of work”.

So how can Payroll RTI Returns impact Universal Credit?

The overall aim of PAYE Real Time Information and Universal Credits is to make the administration easier for HMRC and DWP and reducing fraud by ensuring that employees and businesses pay tax more accurately, whilst claimants receive the benefits they are entitled too. 

Let’s take for example, Child Tax Credits, under the old system the claimant would apply once a year declaring their earnings for the previous year, which could result in over or under payments not taking into account fluctuations of earnings.  But under Universal Credits these payments can be adjusted more regularly based on information submitted by the employer through PAYE Real Time Information submissions every time the employee receives a payment.

Therefore the success of Universal Credits is absolutely underpinned by timely and accurate payroll information being sent to HMRC and subsequently shared with DWP to ensure claimants are receiving the Universal Credit they are entitled to.

So what happens if you get it wrong?

Under Real Time Information, employers are required to submit payroll information to HMRC every time that they make a payment to an employee. If you do not submit accurate information to HMRC at the right time, it could impact what your employee is due to receive in Universal Credits and an unhappy employee.

What you may find as a result of this, is that employees will be keeping a closer eye on their payslips and could be looking for errors and disputes about the accuracy of their payslip.

So how can reduce the chances of this happening?

If you run your own payroll in-house, you can introduce simple checks such as getting your employee and the payroll clerk to sign off timesheets; or you may want to issue a draft copy of the payslips for the employee to check before you finalise the payroll and send the RTI submissions to HMRC.

If you outsource your payroll, you might want to work with your provider to see how they can help ensure 100% accuracy and timely submission of RTI returns to HMRC.

Why not take full control of your payroll processes with our payroll solutions? Our HMRC recognised packages enable you to automate the calculation of PAYE and NIC whilst sending RTI returns seamlessly at the click of a button, giving you the peace of mind that you’re fully compliant with the new legislation. Find out more about the impact of RTI on your business.

Neilson Watts, Sage One Payroll Team