A month after the Government introduced its biggest changes in decades to the employment tax system, we would like to remind small and start-up businesses to be prepared for the changeover.
HM Revenue and Customs (HMRC) says the Real Time Information (RTI) system will save employers millions of pounds each year by reducing errors and fraud. Under the new system, companies have to report Pay As You Earn (PAYE) information every time they pay an employee, instead of once a year. It will eventually replace P35s and P14s.
However, critics have said the new system is too time consuming, especially for small or start-up businesses, who may not have staff with financial qualifications to call upon.
A survey published in February by Crunch Accounting suggested that most firms were ill-prepared for the changes, which came into effect in April. Only 19% of small business said they were prepared for RTI and almost half (46%) said they had no knowledge of it.
Steve Crouch, Financial Director at Crunch Accounting said: “These stats clearly show that despite HMRC’s claims that their communications campaign for RTI is on track, there’s still not enough information from the Government about this huge change to the payroll system.”
More than 1 million businesses are already using RTI, but small businesses and start-ups with fewer than 50 employers are being given until 5 October 2013 to implement the system fully.
HMRC says: “This is a temporary relaxation to give some extra time to small businesses that pay weekly (or more frequently), but who only run their payroll at the end of the month. This extra time will enable these businesses to adapt their processes or change their arrangements with their payroll service supplier so that they can comply with the new legislation.”
Businesses can to sign up to RTI sooner if they wish, but by next year, penalties will be introduced for any firms that do not comply. The allowances mean that until October, small businesses will only have to report once a month, by the end of the tax month. It’s therefore important for businesses to prepare now, so they are ready to embrace the new system fully.
As you will need to include new information in your RTI payroll reports, you need to make sure that all the data you hold about your employees is complete and accurate. You may also need to update your existing payroll software.
Any businesses that are confused about RTI should contact their accountants, payroll agents or HMRC to make sure they are complying with the new system.