Changes to the tax system brought in by HMRC last year could be significantly increasing administration costs for small businesses, according to an annual report released by the Administrative Burdens Advisory Board (ABAB).

Since Real Time Information (RTI) was introduced in April 2013, employers have had to supply a RTI return either on or before their employees are paid, whereas previously this payment data only had to be submitted at the end of the financial year.

While ABAB consider the RTI to be a “worthwhile modernisation” of the PAYE system, there are concerns that smaller businesses have struggled to implement the new reporting system and are finding it difficult to deal with the added administrative pressure.

Concerns over impact of ‘on or before’ rules

In the new report, chair of the advisory board, Teresa Graham, has recommended that the HMRC conducts a survey over the next two summers to see how small firms are coping with having to supply payment information on or before their employees are paid.

“We are working this through with HMRC with a view to arriving at a clearer picture of the real impacts on business”. None of this is intended to detract from the overall judgement that RTI is the right step to have taken; rather it is to help us all arrive at a better shared understanding of the costs and benefits to business of the change, in both the short and medium term.

“We also want to try and help assess whether businesses are really complying with RTI or simply putting in returns to ensure obligations appear to be met: we have continuing concerns about how some businesses are able to deal with ‘on or before’.”

Do you run a small business? What impact has implementing the new RTI PAYE system had for you? Let us know via Twitter @TheInsuranceOct.