New PAYE system will be ‘impossible’ for small businesses, warns accountancy bodyNov 15, 2012
The organisation, which represents accountants in England and Wales, has voiced its fears despite HM Revenue & Customs publishing proposals explaining when employers will be allowed extra time to send in information to HMRC.
ICAEW has warned that the new Real Time Information requirements are at best unrealistic and at worst impossible, creating a new burden on businesses.
East England regional director Pippa Bourne said: “We are particularly concerned about the impact this will have on smaller businesses, which are the lifeblood of the UK economy and essential if the UK is to continue to grow.”
PAYE is the system that HMRC uses to collect 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’ a payment is made to an employee. If the return is not made on time then the employer is potentially liable to penalties.
While complying with the RTI requirements may be relatively straightforward for larger businesses, many smaller businesses will find it difficult and sometimes impossible to cope with.
Mrs Bourne said: “The ‘on or before’ requirement – even with the relaxation to ‘within seven days’ – will not work for many businesses. It is not yet clear what HRMC will do if faced with widespread non-compliance by employers: will they apply penalties or turn a blind eye?
"Either way, the requirement could inflict serious damage to the credibility of the UK tax system.”
HMRC is now proposing extra time for employers in some cases but this would only be an extra seven days. The ICAEW has called for employers to be required to file monthly.
Mrs Bourne said: “The ‘on or before’ rule even as amended completely ignores the way the real world works. It will add significantly to compliance costs and burdens for many small and medium-sized businesses.
"Even if all employers complied with the ‘on or before’ requirement, it is difficult to see how HMRC could reconcile easily all the information it would receive.”