TaxPersonal TaxWorking families tax credit bites small businesses

Working families tax credit bites small businesses

The Treasury has been asked to monitor the burden on employersof paying tax credits through the paypacket with the prospect that the system will be extended.

The demand was made after the Treasury sidestepped arecommendation from the Better Regulation Task Force for theInland Revenue to pay a targeted financial incentive to smallemployers who employ one or more WFTC applicants.

The task force said the Revenue estimate that the average cost foreach employer with 1-4 employees is around £37, but the cost toan employer who has a WFTC case and deals with it on a manualpayroll system rises to £135.

The Treasury claimed that when WFTC is up and running theaverage time small employers will have to spend dealing with atypical WFTC case will be about six minutes a week – costing- around 70p per week.

The Treasury said the Revenue has been providing guidance toemployers, setting up a helpline and providing seminars andpointed out that the Budget already proposes a one-off paymentof £50 to small employers paying tax credits is they alsoqualify for the £59 available to those who submit PAYE returnselectronically.

They plan to introduce an Integrated Child Credit to replaceChildren’s Tax Credit next April and that the system of taxcredits will expand.

Meanwhile MPs want the accounting convention covering WFTCreviewed because Chancellor Gordon Brown is in conflict with theapproach of the Office of National Statistics, the OECD and theEuropean System of Accounts, all of which classify tax creditsas negative tax only when the benefit to the individual taxpayerdoes not exceed the amount of tax he pays.

Brown’s preferred measure of ‘net taxation’ reduces the taxburden below the level that application of the convention wouldimply.

MP’s group slates Budget tax moves

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