The Pay As You Earn (PAYE) system is to change from an annual to a monthly system, in a step designed to make it easier to manage for employers.
Real Time Information (RTI) will be used to transmit information to HMRC each time an employee is paid. This will result in the phasing out of the P35 annual returns as well an end to submitting P45 and P46 forms when an employee starts or leaves.
The introduction of RTI will start in April 2012 with a test polit. If the scheme is successful, HMRC hopes that more employers will use RTI during 2012-13.
Payroll expert Nick Butler of James Cowper said: “This is a sensible decision from HMRC and will be a relief to many business owners. Together with the notifications from HMRC that already exist when a late payment is made, businesses now have every opportunity to avoid substantial and unexpected year-end penalties.”