THE INCOMING real-time PAYE system will prove "impossible" for many businesses to implement, according to the ICAEW.
The warning comes despite HM Revenue & Customs publishing proposals explaining when employers will be allowed extra time to send in information to the department.
The proposal is to allow employers to file within seven days or on the normal payroll date, whichever is the earlier.
Real-time information will see PAYE reported on or before the date payment is made, while changes will be reported as and when they occur, rather than at the end of the financial year.
The requirements are "at best, unrealistic and at worst, impossible", the institute said.
Head of the ICAEW's tax faculty Frank Haskew said the institute is "particularly concerned about the impact this will have on smaller businesses".
Chairman of the tax faculty Paul Aplin said that "the proposed rules do not take account of the real world".
"For example," he said, "the pub landlord who calls in some extra help on a busy night and who currently runs his payroll once a month may now be faced with doing it weekly. That represents an extra burden and an extra cost."
"I am broadly supportive of the concept of RTI," added Aplin, "but the on or before/within seven days rule will add yet another burden to many small businesses already struggling to cope. Does HMRC really intend to apply penalties in this situation or will it merely turn a blind eye? Neither would be satisfactory. The only sensible solution is monthly reporting."
HMRC said it has been piloting real-time PAYE since April and has found "reporting in real time is straightforward for the majority of employers and improves the operation of the PAYE system".
It added: ""There is no need to delay RTI. The pilot is on track and the recent pilot expansion is going well, with the numbers reporting in real time more than doubling on the first day of the expansion.
"We recognise that the real time reporting requirements will create genuine difficulties for some employers, which is why we have agreed an easement in which reporting can be done within 7 days of an employee being paid. We believe this will address the majority of those employers - such as pubs paying late night workers - who have practical reasons why they cannot report to HMRC in real time. We are alive to concerns, particularly from small businesses, and will continue to listen to feedback and seek to minimise administrative burdens on business."
This story has been updated.
Micro businesses will simply not understand or cope with these onerous requirements. they will deter new businesses from employing people and existing ones into shedding staff.What about those who are paid manually? an omni shambles is on its way.
Posted by: michael ward, 13 Nov 2012 | 10:39
How can HMRC impose this, as a payroll agent obtaining information from clients can be a nightmare now, but being informed of any changes within 7 days. I feel there is more chance of there being a cold snap in Hell!
Is this the case of HMRC yet again coming up with a cost saving measure by passing those costs on to the taxpayer and gaining more revenue by the way of fines when the taxpayer cannot meat the deadlines.
Posted by: A Thompson, 13 Nov 2012 | 10:50
The extra costs involved in employing an accountant to obey this ridiculous proposal will mean that many small companies have to lay off staff to meet these additional fees.
A boom for accountants, but a bust for staff .
Posted by: HUGH DUNLOP, 13 Nov 2012 | 13:48
I employ 4 people and operate PAYE but although I have heard a lot of people taking about Real Time Information I cannot find on the HMRC site a tutorial on what is required of me. Is there a tutorial available or are we again into smoke and mirrors?
I am looking for detailed information on what I have to enter and how to enter. Does it for instance produce pay slips. What does it do. Will I have to operate a payroll system and enter totals.etc..?
HMRC keep sending me corresponse advising me to get prepared but get prepared for what?
Posted by: Peter Sowerby, 13 Nov 2012 | 20:26
The standard PAYE tools will support this for you when you update in April. If you use payroll software then they should update this within your service agreement, or you may need to update the software.
One of the big items here is that you will need to use RTI compliant software as it will be impossible as a paper exercise due to the volume of data needed.
The big thing is you need to understand the process and there is information about this on the HMRC site (http://www.hmrc.gov.uk/rti/employerfaqs.htm) and then integrate this into your processes as a business.
This may be the time to use a payroll bureau if your unsure.
Hope that helps!
Posted by: Oliver, 14 Nov 2012 | 15:35
I agree RTI is a nice concept in a nice and perfect world but sometimes things are not quite so straightforward. While I understand CIS had its hiccups when it was developed, why did HMRC not follow that path. There would only be a one month delay (rather than the current 12!)and just as accurate, particularly for companies who pay monthly. It gives an employer a bit of breathing room to ensure everything is correct and reduce costs and time....
Posted by: Val, 22 Nov 2012 | 15:41
as a small business we already have a hard time getting paid by large companies. We pay our payroll tax quarterly to give us some chance. This year has been worse than ever with some Blue chips taking over 8 months to pay their bills - Now HMRC is not satisfied that our enforced subsidising of Big Business (notoriously poor at paying tax) is sufficient, we will now get fined for Big Businessess poor practice too. I can't see us surviving this one.
Posted by: tom, 30 Nov 2012 | 15:58
To help smaller business, there should be
an exemption to RTI for companies with less than say 4 employees and continue with the old system.
Posted by: Charles, 28 Feb 2013 | 17:51
You may also like
If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.
In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.