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HMRC Postpones Payroll Overhaul For Small Firms

by Robert Lee, Tax-News.com, London

21 March 2013


The UK's smallest businesses will be given an extra six months to prepare for HM Revenue and Customs's (HMRC's) shake up of the payroll taxation system after the taxman announced a relaxation of the new Real Time Information (RTI) rules.

The RTI system is due to be rolled out from April. It will mean that employers will need to submit to HMRC their pay-as-you-earn (PAYE) returns, containing details of all employees’ pay, tax and deductions, electronically each time they pay their employees.

However, HMRC has now stated that businesses with fewer than 50 employees will be allowed to send this information in regular, rather than real time, until October 5. According to a statement, HMRC "recognize that some small employers who pay employees weekly, or more frequently, but only process their payroll monthly may need longer to adapt to reporting PAYE information in real time."

John Walker, National Chairman of the Federation of Small Businesses (FSB), welcomed the news: "It is great news that HMRC have listened to our call for the smallest firms to report regularly in line with their main payroll run, but not in real time. It has taken on board the FSB’s concerns about the time constraints and problems that small firms will face when having to report in real time."

Patrick Stevens, President of the Chartered Institute of Taxation (CIOT), believes the grace period will prove beneficial. He explained: "By October 2013 we should have a clearer idea of what concessions small business will require for RTI to work effectively for the good of all. And then we can have a sensible dialogue with ministers and officials about how to build what we have learned into the design of RTI and universal credit in future."

HMRC says that it will use the time to work with employer representatives to "assess and understand the impact of RTI on the smallest businesses and consider whether they can make improvements to real time reporting which will address their concerns without compromising the benefits of RTI."

TAGS: tax | small business | business | revenue guidance | Federation of Small Businesses (FSB) | employees | payroll | tax authority | social security | HM Revenue and Customs (HMRC) | revenue statistics | tax reform | HM Revenue and Customs (HMRC) | individual income tax

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