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Pay service no help

Warning that small business payroll service will become mired in tax complexities.

Government plans for a small business payroll service are unrealistic and will be of little use to employers struggling to cope with the complexities of the working family tax credit, experts warned this week.

The ambitious plan for a payroll service was unveiled last week by small firms minister, Michael Wills. It forms an important part of the government’s much-vaunted Small Business Service, an initiative backed with £100m of government funds.

The consultation paper outlines a voucher scheme – worth between £50 and £200 for each company – for payroll software and services.

The DTI aims to get 250,00 small businesses involved in the initiative, which is due to come into force next April.

But the plans immediately came under fire from small business partners and software companies.

Teresa Graham, head of Baker Tilly’s business services unit, said the consultation paper was an acknowledgment that small business could not cope with the raft of recent legislation effecting payroll. The working families tax credit, due to come into force from April 2000, will require employers to pay low-paid employees tax credits on top of their wage or basic salary.

‘The credit is extremely complex and will be horrific for small businesses. It will also be followed by other changes such as those to disability benefits,’ she said.

Graham added that accountancy firms were wary of providing payroll services because of the risk of errors and their relatively low value.

Other payroll experts raised concerns over whether the government could deliver on its promises.

An automated payroll service, run last year by the Inland Revenue’s Leicester office, was due for a national roll-out in April, but was ditched.

Carol Wilson, payroll product manager at small firm business software specialist Sage, said the Revenue’s scheme ‘did not get much take-up’ because companies were reluctant to pass over tax-sensitive payroll information to the government.

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