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HMRC wise to relax real-time requirements

AFTER A YEAR, IT’S FINALLY HERE.

The biggest change to income tax and National Insurance Contributions since PAYE was introduced in 1944.

It’s a hugely ambitious undertaking which 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.

Changes in circumstances – such as a pay rise, promotion or departure from job – will be reported as they happen.

Currently processing the details of some four million individuals every time they’re paid, from tomorrow (6 April 2013), it will be extended to take in every single person in employment in the UK.

As with any project of this gravity, many have predicted teething trouble, with the Public Accounts Committee chair warning it may not be the panacea to tax inaccuracies and criticising the lack of any back-up system.

It was not long ago that it looked like there would be one, unyielding rule for all businesses. It is encouraging, then, that having initially been insistent all businesses – from the micro to the multinational – commence the real-time reporting right away, allowances have been made for businesses with fewer than 50 employees, allowing them to continue reporting their payrolls monthly until 5 October while they prepare.

Given all the warnings and criticism over the unwieldy nature of the requirements for many smaller businesses, it is a huge relief to see the comments made by HMRC director-general for personal tax Ruth Owen emphasising the coming 12 months will be a “transitional period” as the system beds in.

While it is arguable HMRC should have drawn up greater contingency plans, its relaxation of the real-time obligations placed upon smaller business is to be praised.

Calum Fuller is the tax correspondent for Accountancy Age and Financial Director.

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