HMRC is offering the smallest businesses extra time to get ready for RTI.

Wednesday 20 March 2013

Small businesses have been furnished with extra time to prepare for the switch to real-time PAYE.

From the start of the new tax year on April 6th, companies will be expected to report details of payments to employees on or before the date when the payment is actioned.

However, businesses who process their payrolls on a monthly basis may pay their employees on a weekly or bi-weekly basis, and small businesses are likely to need more time to adapt to real-time information (RTI).

In an attempt to reduce the pressure on small businesses to comply by the fast-approaching deadline, HMRC has now relaxed the arrangements those with less than 50 employees for the first six months of the new regime.

Until October 5th, firms which struggle to report up-to-date information on or before the day they pay their staff will be able to submit data to HMRC whenever their normal payroll ends, so long as it falls before the end of the tax month of the 5th.

HMRC continues to say that it will spend the summer working with employer representatives to get a better picture of how RTI is affecting them for better or worse. It has even said that it is still looking for ways to improve the system from the perspective of small businesses without compromising the success of the Department for Work and Pensions’ universal credit system.

Robert Downes, spokesman for the Forum of Private Business, said that this sudden change could be a sign of panic at HMRC about businesses’ capacity to cater for RTI.

However, he said the move is probably the best HMRC could have made under the circumstances, since “a tax system in meltdown come April is in nobody’s best interest, and no doubt many firms will now be breathing a sigh of relief”.

Nevertheless, FPB fears that the new rule will make the upcoming transition to RTI even more confusing to a large number of small businesses already struggling to adapt.

Contractors who deal with their own payroll details have already raised concerns about how they will keep themselves compliant with the new regulations. Software providers Intuit published a study last month which showed that only a quarter of small businesses had made all of the necessary changes to get ready for the new reporting process.

Meanwhile,  president of the Association of Taxation Technicians Yvette Nunn said that because small businesses are central to the UK economy, it is in the country’s interest to reduce bureaucracy and encourage them wherever possible. Relaxing RTI at least in its early stages, she noted, would go a long way towards making lives of the smallest businesses much easier.

Businesses with nine employees or fewer can adapt to RTI by using one of the programs available for free download from the HMRC website, although existing payroll software should also be able to run the Full Payment Submission needed to send real-time payment details.

With the right support, RTI could actually be relatively painless. Brookson has already invested in the right systems and made all the changes to take care of its customers’ affairs. Contractors and self-employed professionals can sit back, relax and let Brookson do all the hard work, keeping both freelance workers and the taxman happy.

By Victoria McDonnell

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