Red tape watchdog concerned by ‘significant’ RTI costs for small firms

Report finds ‘much to be done’ in order to fix new tax system

Small firms are struggling with the administrative and cost burden of implementing the new Real Time Information (RTI) reporting system, according to a new report by HM Revenue and Customs (HMRC)’s red tape watchdog.

The Administrative Burdens Advisory Board (ABAB), an independent watchdog created to ease the red tape burden on small firms’ tax obligations, today released its annual report which says it is ‘concerned’ about the ‘significant’ cost burden imposed by RTI reporting requirements on small business.

RTI, which came into force in April 2013, is a system introduced by HMRC intended to make it easier for businesses in the UK to comply with Pay-As-You-Earn (PAYE) reporting requirements.

Under RTI, businesses must submit PAYE payroll information ‘on or before’ the day they pay their employees, rather than on a periodic basis.

In its report, ABAB acknowledged the ‘important and worthwhile’ modernisation of PAYE represented by RTI, in addition to the ‘sensible’ changes already implemented by HMRC to ease the burden on small businesses, including a relaxation of the ‘on or before’ rule and the phased introduction of penalties.

However, it said the time it took to engage in a discussion about these issues with HMRC was ‘disappointing’, adding that many of the more onerous features of RTI could have been ‘designed out’ had ABAB and other external stakeholders been listened to at an earlier stage.

In particular, the Board highlighted its worry that the ‘on or before’ rule remains too burdensome for many small firms to cope with, and said that some appeared to be simply putting in returns in order to give the appearance that obligations were being met.

The Board said it was working with HMRC to obtain a clearer picture of the cost impact RTI was having on business, and recommended the body carry out a survey of small businesses to assess the true impact of the new rules.

 

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