Despite Government efforts to make companies aware of fundamental changes to PAYE, the majority of small companies are not prepared for the upcoming changes. That’s the main finding of research by Crunch Accounting.
Currently payroll information has to be submitted annually to HMRC. But from April information on salary, income tax and national insurance will have to be submitted monthly. Experts are in agreement this is the biggest shake-up of PAYE for more than 50 years.
The new system is called RTI which stands for Real Time Information. HMRC believes the new system will be better able to monitor individuals‘ earnings because people no longer stay with the same employer for the bulk of their working lives.
HMRC says the current annual reporting system tends to generate errors and incomplete information. Cynics say the new system will allow HMRC to identify companies with tax arrears more quickly.
Whatever the impact though, your company needs to be prepared for the changes as penalties for non compliance will take effect from 2014. All this is probably bad news for the smallest companies. Regardless of the number of employees compliance requires new payroll software or changes to current packages.
This means you should be planning now. If you run a company, no matter what the size, it’s probably not what you wanted to hear. After all, you’re very busy with the day to day management of your business. However, it saves man hours further down the line to be compliant from day 1.
One casualty of the research is probably HMRC itself. HMRC claim that their communications plan for RTI is on track. Yet, with almost 50% of companies not having heard of RTI, questions must be asked about whether communications are reaching the right audience.
The team handling your payroll is going to have far more work to do. If you’re not aware of RTI chances are they aren’t either. They will shoulder the brunt of the changes. You don’t want to alienate staff just when you need them. Therefore it’s in everyone’s interests to get to grips with the changes as soon as possible.