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.
Does Darwin's theory apply to taxation? Colin ponders...
The UK tax gap fell in 2014-15 to its lowest-ever level of 6.5%, revealed official statistics published today
Changes to the tax system is urged to support the growth of entrepreneurs, found a report from the Grant Thornton UK, the Institute of Directors, and the Prelude Group
The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states