THE vast majority of employers will be able to cope when major changes to the way they send PAYE returns to the taxman come into effect, says a Huddersfield-based business group.

From April, bosses will have to send PAYE returns electronically to HM Revenue and Customs each time they pay their employees as part of routine payroll processes.

The returns will include details of all employees’ pay, tax and deductions. The new system – called Real Time Information – process will replace sending a separate return at the end of the year.

PAYE is the way that HMRC collects Income Tax and National Insurance Contributions. Currently, employers have to deduct this from their employees' wages and pay HMRC either monthly or quarterly.

Under RTI, an electronic return will have to be made to HMRC “on or before” the date a payment is made to an employee. If the return is not made on time, the employer is potentially liable to penalties.

HMRC said employers should visit website for full information about the new RTI system, including how to prepare, payroll software options and hints and tips to help avoid some common pitfalls.

HMRC said employers may have to talk to their payroll software provider about acquiring new or updated payroll software – and they would need to start checking and updating employee information, adding: “It’s vital that the information employers have about their employees is accurate and up to date.”

Steven Leigh, head of policy for the Lockwood-based Mid Yorkshire Chamber of Commerce, said the new system would pose few problems for companies already using specialist software or the services of an accountant to handle payroll.

He said: “The only businesses likely to be affected are those that aren’t online in any way or are dealing manually with payroll paper records. Those companies would be better advised to automate their processes. You cannot run a business in the modern world without computer links.”

He said HMRC was “very serious” about introducing the new system, adding: “In the long-term, RTI could bring savings.”

Ruth Owen, HMRC director general for personal tax, said: “To avoid a last minute rush, it’s vital employers act now.

“Employers will need to send their first return – called a Full Payment Submission or FPS – for salary or wage payments made to employees on or after April 6. If they have 250 or more employees, they will have to send an Employer Alignment Submission before the first FPS.

“Although reporting PAYE in real time will be straightforward for most, some preparation is needed. There is more to it than simply buying or updating software – although this is key.

“Employers may need to add employees such as casuals or those below the Lower Earnings Limit to their payroll system and must think about their payroll practices to make sure that they work for real-time reporting.”

The RTI pilot was launched last April with just 10 employers. Since then, the pilot has expanded three times. By March 31, 2013, HMRC expects PAYE records for about 6m people to be reported in real time.

HMRC said reporting PAYE in real time would allow it to receive information on employees’ earnings, tax and National Insurance Contributions as they are paid, rather than at the end of the year. RTI would make it easier for employers to administer PAYE and would make tax more accurate.