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FSB calls for eleventh hour change to HMRC’s Real Time Information

February 25, 2013

 

The Federation of Small Businesses made a last-minute plea yesterday to change HMRC’s established plans to introduce Real Time Information reporting of PAYE on 6th April.

Mike Cherry, the FSB’s policy chairman, speaking to the Financial Times, said the changes were “incredibly burdensome” and could not be introduced at a worse time.

“There is additional cost, which is to be regretted, but the administration time takes people away from their business at a time when they should be keeping it going or growing it,” he commented.

The FSB is proposing an alternative system of Regular Time Information where employers could submit returns monthly, up to two weeks after the tax period. This differs significantly from HMRC’s Real Time Information reporting rules which align employers’ payroll with their payments to staff, requiring them to report PAYE to HMRC over the Government Gateway via the internet every time they pay employees.

However there seems very little prospect of HMRC changing course with just 6 weeks before some 1.4m UK businesses will be required by law to start reporting RTI to HMRC. HMRC’s introduction of Real Time Information reporting of Pay As You Earn (PAYE) is required to support the Government’s plans for the introduction of Universal Credit and welfare reform in October 2013.

Mike Cherry, also challenged HMRC’s assertion that RTI will save UK businesses the £300m HMRC first claimed in its RTI impact assessment last year. As reported by PayeRti.org, HMRC’s original impact assessment for RTI promised to revise its provisional estimate, showing a £300m saving, of the cost benefit for UK business as HMRC's pilot of RTI progressed but has not yet done so with just one month of the RTI pilot left to run.

As has been extensively reported by PayeRti.org, business awareness of RTI’s imminent arrival is still limited. The Federation of Small Businesses undertook in October 2012 the most comprehensive survey of UK business awareness of RTI which first highlighted the widespread lack of awareness of RTI’s arrival in April 2013. This has been followed by a number of smaller surveys over recent months confirming these findings with little overall improvement in the level of general business awareness of RTI. A recent poll by the Forum of Private Business, another respected small business organisation, found that two-thirds of small businesses understood the implications of RTI, but nearly half did not see any benefits.

“There are a significant number still ignorant and unaware,” said Phil Orford, the FSB’s chief executive. “The other important issue raised by our research is the huge lack of confidence small firms have in HMRC to cope with the changes.”

HMRC has announced that the failure to report RTI will incur financial penalties from the start of April 2014.

Mr Cherry said the change was particularly problematic for employers with poor broadband connections. These are mainly in rural areas but there are also some blind spots in towns.

He said there was anxiety about the combined effect of RTI and universal credit. “The concern is that it’s not going to work and that the administrative burden could be disproportionate and damaging to small businesses.”

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