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PAYE changes threaten SMEs

Small companies are struggling to face increases in payroll costs as the biggest shake up to the PAYE system in 70 years approaches.

Some estimate their costs could quadruple if they continue with their present systems while tax advisers are budgeting for a rise of more than 50 per cent. HMRC estimated up to £300 million a year in administration costs would be saved on average per business with the introduction of a new system as it is expected to speed up the collection of billions of pounds owed.

Real Time Information means employers will have to provide HMRC with PAYE details every time they pay an employee, rather than annually. HMRC has said the new system will eliminate tax code errors, reduce the risk of fraud and support the introduction of Universal Credits, which streamline benefits into a single payment.

A pilot scheme is said to have worked well in trial but naturally, teething problems are anticipated including the fact that cashflow for many companies will now be put under pressure as the choice to delay the payment to once a year will no longer be an option.

Even more worrying are the results of a survey last month which revealed half of the companies profiled had not heard of the changes, despite them being imminent.

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