HM Revenue & Customs has had to postpone a major overhaul of payroll taxes because small businesses have complained that they’re not ready.

Real Time Information or RTI was originally introduced for employers to provide information about tax and National Insurance each time they pay an employee, instead of annually – due in October this year.

Vincent & co RTIBut HMRC has now announced that businesses with 49 employees and fewer are exempt from late-filing penalties until March 2015. Until then, the PAYE information can be submitted monthly.

Commenting on this latest delay since the introduction of the new scheme in October 2013, HMRC director-general for personal tax Ruth Owen said: “We know from our experience of rolling out of RTI that to ensure a smooth transition for our customers it’s best to introduce changes in stages. This will allow us to update our systems and enhance our guidance and customer support as needed.

“We know that those who have had most difficulty adjusting to real-time reporting have been small businesses, so this staged approach means they have a little more time to comply with the new arrangements before facing a penalty.”

The Chartered Institute of Taxation (CIOT) welcomes the relaxation but warns that there are still problems inside the system. According to Colin Ben-Nathan, chairman of the CIOT Employment Taxes sub-committee, the taxman is guilty of firing off erroneous message to small firms, accusing many of these firms of late filing, non-filing and late payment. This results in additonal form-filling for these businesses, and often requires a lengthy appeals process.

Originally, RTI was intended to help HMRC to check on employers’ tax more effectively. Companies need to update their payroll software or invest in new systems, which could be costly.

If you are concerned about RTI in your business and need to make sure you don’t incur penalties, call Vincent & Co for advice and guidance. We’re helping businesses across Torbay to deal with these changes.