AAT research: why SMEs need more help in understanding HMRC’s changes to PAYE

Recent AAT research has shown that just over a third of SMEs are unaware of the incoming changes to the Pay As You Earn (PAYE) system. Adam Harper, AAT’s Director of Professional Development, argues that more needs to be done to support and educate the UK’s small business community

In January we surveyed 1,000 decision makers, managers and directors of SMEs to find out how much they knew about key changes to the PAYE system which are coming in as soon as April this year. The results were concerning and revealed that:

• One in three SMEs (35 per cent) don’t know about the changes to the PAYE system – the introduction of Real Time Information (RTI) – which will be implemented from April this year
• Of those who are aware, one in three don’t know if their payroll is set to cope with the changes
• The biggest fears of SMEs around RTI are the time and money required to successfully implement the changes

The lack of understanding about these major changes also revealed that 30 per cent of those businesses that were aware of RTI didn’t know if their current software or payroll could cope with the changes.

SMEs concerned about cost of RTI

With HMRC issuing onerous penalties for those businesses that don’t comply, it came as no surprise that 35 per cent of SMEs are worried and concerned about the cost involved, with another third concerned about how time consuming it will be to implement.

Half of SMEs also believe that the complexity of the tax system favours big business. More than 40 per cent think that HMRC needs to take responsibility and address those organisations suspected of tax avoidance to ensure a more level playing field – and putting a stop to “sweetheart” deals.

The results are worrying. We need the small business community to feel that the UK government is doing more to incentivise and stimulate their growth, especially with many small businesses feeling disheartened with the growing number of high profile tax avoidance stories.

With nearly half of SME enterprises unaware of the finance lending initiatives available to startups and entrepreneurs, more needs to be done to educate them about their options.

Why we must guide SMEs through the PAYE changes

The lack of understanding about RTI clearly indicates not enough has been done to guide small businesses through the massive changes to PAYE, which will have a big impact on time, resource and spend for small enterprises.

It’s a distressing situation given April is fast approaching.

Update, 25 February 2013

Shadow Exchequer Secretary Catherine McKinnell MP contacted AAT to say:

‘These findings are really very worrying, and add to those concerns being expressed by a plethora of other bodies that far too many small businesses are simply not aware of the changes that are coming their way in less than two months. The Government has clearly failed to communicate this policy, and the red-tape burden it will place on SMEs who are already struggling – despite the absolutely vital role Real Time Information will play in delivering Universal Credit.

‘I have repeatedly asked the Minister whether he is confident that RTI will be delivered as intended, and on time. I am yet to receive this reassurance, or indeed a response.’

Michael Steed MAAT chats to Ben Walker, editor of Accounting Technician magazine, about Real Time Information (RTI):

RTI mastercourses are taking place in London and Sheffield in March 2013. More information is available online.

Adam Harper is AAT's Director of Professional Standards & Policy..