FSB bemoans reforms of payroll taxes

25th February 2013 | News

The Federation of Small Businesses (FSB) has made another effort to ensure that planned reforms of payroll taxes are not too harsh.

The revised approach, which is due to be implemented in April, will see employers send HM Revenue & Customs (HMRC) details of how much each employee has been paid as well as the amount of tax deducted under the pay-as-you-earn system every time they pay an employee.

Under the current system, details have been sent to the taxman just once a year.

Business leaders, however, are fearful that many firms will be unaware or unprepared for the changes by the time they are formally introduced.

Mike Cherry, the FSB's Policy Chairman, is among those to have questioned the wisdom of the reforms, saying that they are "incredibly burdensome".

"There is additional cost, which is to be regretted, but the administration time takes people away from their business at a time when they should be keeping it going or growing it," he told the Financial Times.

The FSB has therefore developed an alternative action plan whereby employers could submit returns once a month, up to two weeks after the tax window.

According to the body, its approach would prove beneficial to those firms that pay their tax on a weekly basis or had a mix of payment times.

But with just six weeks to go until the planned changes are introduced, there appears to be little hope of any last-minute revisions.

Indeed, HMRC has staunchly defended the plan in recent times, arguing that reporting in real time will make PAYE "quicker, easier and more accurate - we estimate it will save employers £300 million net per year".

"These savings result from PAYE reporting being integrated with normal payroll routines, simplifying reporting of starters and leavers and removing the end of year return," HMRC explained.

Added to this, HMRC has pledged to write to employers again this month and make information about the changes available across various platforms to ensure that small business owners are fully informed.

Posted by Thomas Fletcher