It is the second time the deadline for using the new system, which has been widely criticised by business organisations for being poorly publicised and supported, has been extended.
Under RTI, employers will give tax and National Insurance information (as well as details on any deductions) before or at the same time as they pay their employees, rather than at the end of the financial year as they have done previously.
The new system was piloted in the UK, by larger businesses, during 2012 and was officially launched on 6 April this year when around 250,000 businesses were expected to make the switch, with all businesses due to be compliant by October 2013.
However, with just a month to go to the roll-out, HMRC relaxed the deadline by six months for businesses with fewer than 50 employees, meaning they were not expected to comply until April 2014.
Now it has extended the deadline again, but this time for two years and only for businesses that employ fewer than nine members of staff. HMRC has also launched a ‘support package’ aimed at helping these businesses make the change during that time.
“The vast majority of employers are now successfully reporting PAYE in real time and are finding it easier to do this than they expected,” said Ruth Owen, HMRC’s director general for personal tax.
“But we appreciate that for some micro-employers it has presented challenges for them to meet the deadlines. This package strikes a good balance by ensuring RTI improves PAYE processes while minimising the impact on micro businesses and their agents.”
The package includes improved guidance for employers and a commitment to develop alternative ways of reporting PAYE, such as with mobile apps.
According to research carried out by the Federation of Small Businesses (FSB) among its members, 80% of businesses are reporting in RTI, but around 35% have said it has made reporting more difficult.
FSB national chairman John Allan said: “The smallest firms are more likely to find RTI adds a bigger time burden to running their business, so the move to allow these businesses to continue to report once a month, when they run their payroll, will help them.”
RTI has been introduced to support the roll-out of the controversial Universal Credit system. Employers must be reporting in RTI to ensure that all their employees who claim Universal Credit receive exactly what they are entitled to.
The new, merged, benefit system was due to be fully implemented by 2017, but last week, ahead of the Chancellor’s Autumn Statement, work and pensions secretary Iain Duncan Smith admitted it would now miss this already extended deadline amid issues with the IT delivery system.
