Quarter of small businesses unaware of PAYE shake-up

A quarter of small firms are oblivious to major upcoming changes to the pay-as-you-earn (PAYE) system which will alter their payroll reporting duties to HMRC, a survey by the Federation of Small Businesses (FSB) has found.

Designed to simplify and modernise the way PAYE payments are recorded, Real Time Information (RTI) will require almost all employers and pension providers to report their employee's PAYE payments such as tax and NICs on or before each pay day, as opposed to the end of each tax year.

According to the survey, only 16 per cent of the 1,700 small firms questioned were fully aware of RTI - heralded as the biggest shake-up to the PAYE system in 60 years - with 25 per cent having never heard of it.

In addition to simplifying the reporting of new starters and leavers, RTI will also be crucial for the Government's new Universal Credits programme, which will calculate welfare claims and tax credits automatically on real time earnings.

However, two thirds (66 per cent) of respondents are not confident that RTI will achieve these aims. Furthermore, while the majority of employers and pension providers will join RTI from April 2013, with all employers adhering to the new system by October 2013, 60 per cent of firms claim they have not had any communication from HMRC.

Chairman for the FSB, John Walker, said it had 'real concerns' for businesses and the success of the Universal Credit due to the lack of awareness.

"There are a number of steps that a business must complete before they can provide Real Time Information to HMRC so it is critical that those affected know about it. Of the very small number of firms that are aware of the change, 30 per cent have had to buy new software for their business."

"HMRC needs to act now so that all small firms can prepare their business as they only have six months in which to do it."

"Without adequate communication and education from Government, small firms won't be able to prepare. It just isn't fair if they're then penalised for not complying," he added.

HMRC kicked off its RTI awareness campaign last month by writing to more than 1.4 million employers about the upcoming changes. It is encouraging businesses to prepare their PAYE systems by cleaning their employee data, contacting HMRC, and by considering possible changes to internal processes.

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