Member Article

Businesses need to recognise PAYE changes

With the biggest overhaul of the Pay As You Earn (PAYE) system of income tax coming into force this month, tax experts at Waltons Clark Whitehill are urging business owners to be aware of how it affects them.

The Real Time Information (RTI) reform is one of the biggest changes to the PAYE since its introduction in 1944.

A result of tax code complications in 2010/11 which saw around 1.4 million people sent demands totalling £3.8 billion because of PAYE system problems, RTI means employers can no longer leave it until the end of the tax year before telling HMRC how much they had paid staff.

Because of the growing frequency with which people change jobs, compared with 70 years ago when the system was introduced, employers must now inform HMRC when a payment is made.

Shirley Lamb, Payroll Manager at Hartlepool chartered accountants and business advisers Waltons Clark Whitehill said: “For those people who currently use payroll software, it means more frequent submissions to HMRC, but it is employers who still operate a manual system throughout the year that will see the biggest difference. There is no manual option for PAYE following the Real Time Information reforms, so there may need to be an investment in software and also training to use it.

“This could be a tricky transition for some, especially smaller and medium sized businesses which handle accounting in-house, because it draws time and investment away from their core business.

“Already in recent years, as the economy has become tougher, we have seen a lot of such businesses outsource their accounting to firms such as ourselves so that we can concentrate on what we are trained to do and they can focus on their core business.

“Any new change in systems which requires investment and training is only likely to increase that trend.”

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This was posted in Bdaily's Members' News section by George Hardey .