Small businesses could face difficulties from new PAYE system

Small businesses are likely to find the new Pay As You Earn (PAYE) system difficult to work with and time-consuming, according to a national accountancy body. The Institute of Chartered Accountants in England and Wales (ICAEW) has suggested that new requirements, such as Real Time Information (RTI), will create an additional burden on small businesses that are already snowed under due to high levels of bureaucracy. Currently, businesses deduct tax and national insurance from wages and settle payments with HMRC on a monthly or quarterly basis. However, the new system means an electronic payment will have to be made to HMRC ‘on or before’ payments are made to employees. The head of the ICAEW’s Tax Faculty, Frank Haskew, expressed his concern on the impact the changes will have on the UK’s small businesses, which play a vital part in supporting the UK economy. “It (the ‘on or before’ rule) will add significantly to compliance costs and burdens for many small and medium sized businesses,” he suggested.

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