Chartered accountancy firm Clough & Company is advising businesses to prepare for a major shake-up to ‘Pay As You Earn’ (PAYE), which will affect nearly all employers, after a survey found only 16 per cent of businesses were aware of their upcoming obligations.
From April the ‘Real Time Information’ (RTI) programme, which is at the heart of the government’s welfare reform, will feed up to date information about employee income to the Department for Work and Pensions, so it can accurately calculate payments that individuals are entitled to.
However a survey by the Federation for Small Businesses of 1,700 small companies found one in four businesses have never heard of RTI and 60 per cent of companies say they have not yet had any communication from HM Revenue & Customs about the scheme.
Nigel Westman, Partner of Clough & Company, explains:
RTI comes into force from April 2013, and it is the biggest shakeup to payroll since PAYE was introduced in 1944. Employers will be required to submit PAYE information to HMRC each time a payroll is run and employees are paid.
In addition they will have to report any changes to PAYE as and when they occur, instead of at the end of each financial year. The scheme is also designed to simplify the reporting system when a company recruits new employees or when staff leave, as well as making the payroll process more straightforward.
Because businesses will have to transmit an electronic RTI submission to HMRC on or before every pay date, they will need systems in place to accommodate this. Almost a third of businesses that reported being aware of the changes said they had to buy new software, so it’s clear that some businesses will have to make major changes in the coming months. Plus any businesses that don’t comply with the changes will be penalised so they must start planning for it now.