The Chartered Institute of Taxation (CIOT) has welcomed the announcement by HM Revenue and Customs (HMRC) that they are willing to relax slightly the requirement for employers to submit PAYE information in ‘real time’. However, the Institute is warning that many businesses will still face significant practical hurdles in submitting their payroll to the taxman when they join RTI, as well as increased admin costs.
The CIOT and other bodies have expressed a number of serious concerns about the requirements of Real Time Information (RTI), which become compulsory for most employers from April 2013. Guidance for employers3 published yesterday by HMRC addresses some of these concerns.
However, the proposed relaxations are narrowly defined and there is still an expectation that many employers will need to submit payroll information weekly. This means that a small business that makes an identical payment to a member of staff each week will have to outsource its payroll or have a bookkeeper visit weekly to run the payroll software each time, instead of just once a month, with a corresponding increase in cost, typically from about £250pa to around £1,000pa for a small employer.
Commenting, Colin Ben-Nathan, chairman of the CIOT’s Employment Taxes committee, said:
“This guidance is a welcome step forward, and reflects a great deal of work by the CIOT, other bodies and employers more generally, as well as by HMRC. It was clearly very unrealistic to envisage farmers filing payrolls daily in the middle of a field when they pay casual labourers.
“However, the ‘on or before’ requirement still represents a huge increase in the burden on many small businesses that currently keep adequate records. It will mean more frequent running of payroll software and more reporting for some employers when, in the past, they have been able to comply with their obligations by doing a monthly payroll. Many small employers will find themselves paying their payroll agents much more than at present.
“The issues go beyond costs. Many employers, including larger ones, will actually find it impossible to deal with elements of the ‘on or before’ requirement. For example, where an expatriate has been awarded shares the employer will often not have the information to be able to file in time even within the extended deadline. This leaves the employer facing a penalty and reliant on HMRC’s subjective judgement under the reasonable excuse4 procedure.”
The CIOT is calling for the Government to consider changing its Universal Credit plans in order to allow monthly reporting of payments under RTI. The CIOT believes the requirement to file more frequently than this will pose a considerable hurdle to full compliance for many employers (especially small businesses and in certain business sectors).
The CIOT continues to have concerns about a number of other aspects of RTI and Universal Credit that are yet to be resolved. These include the requirement to report PAYE online, when many small employers do not routinely use online systems, and changes to the treatment of the self-employed5. The CIOT is calling on the Government to defer the RTI penalty regime so that no late filing penalties are levied on employers for in-year submissions during the first full 12 months of RTI’s operation.