SMEs go online to thwart NI headache

Small businesses who still calculate NIC manually have been urged by leading
advisers to move to an electronic system. National Insurance is often described
as a stealth tax by detractors. It was used as a battering ram by the Tories in
their election manifesto with talk of “scrapping” Labour proposals for a 1p rise
for employers and employees.

The real numbers showed companies and employers would still pay more under a
Tory government. This has been compounded by the Lib-Con government saying the
1p rise on employees proposed by Labour would go ahead unchallenged to pay for
the increase in tax-free personal allowances.

Smaller companies doing the numbers manually must move online to avoid snags,
said one leading adviser. Bill Dodwell, head of tax policy at Deloitte, said:
“It would be sensible for anyone still preparing manual records to move to an
electronic system.”

Many businesses use an online payroll program, or HMRC’s free calculator, to
work out PAYE and NIC. “Given that the year-end filings must be made online,
there’s a huge advantage for everyone in using a PAYE program,” Dodwell added.

Despite Tory assurances that Labour’s NI raid would be “scrapped”, employers
and staff were always going to be paying more NIC under Tory proposals.

The Conservatives made a commitment to “stop’ Labour’s tax rise increasing
the threshold at which people start paying NICs, but this only partially
cancelled out the effects of the Labour proposals.

However, the timing of the emergency Budget next month will allow companies
time to bed in any changes, giving software providers and employers four months
to prepare.

Advisers have said the breaks for the employers would help to spur the
economy and would not be too onerous for most businesses. “Employers will save
money from April 2011 (not just avoid a rise) for employees earning up to
£21,000 a year, which will support half the workforce,” Dodwell added.

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