An interesting research report has been produced for HMRC looking at the problems faced by micro employers managing PAYE in Real Time.
A micro employer is classed as a business with 9 or fewer employees.
The key findings from the report are summarised as:
- Regardless of how the micro-employers manage their payroll, PAYE management is not integrated into the ‘payroll process’. Most do not see it as an end-to-end process at all, just a set dissociated tasks.
- The main source of micro-employer error is a lack of understanding of how PAYE real time reporting obligations should be managed. PAYE is often treated separately from the function of running the payroll, and the related tax month deadlines.
- The biggest single challenge seem to be the dates (knowing what should be done and by when).
- Examples of good practice do exist, and are typically when ‘running the payroll’ and associated tasks are strictly managed, and when RTI reports and duties are integrated into the payroll process.
- The misunderstanding of RTI reporting is exacerbated by lack of checks and low prioritisation, which also contribute to errors in RTI submissions.
- Penalties can affect a change in behaviour but their impact is currently limited by the lack of understanding and explanation as to why the penalty was issued.
- There is no shortage of information to educate people about their duties but the investment required to do this can cause difficulties for those where time and/or available money is scarce.
There are two emerging considerations for HMRC:
- The first is for HMRC to focus on better rather than more support, to generate more accessible resources – such as a road map to guide one through the process, with key points highlighted, plus relevant links, and dates to be aware of.
- The second for HMRC is to introduce clarity and consistency on penalties. To include more detailed information in the penalty notice letter itself, or help micro-employers to identify the cause of error.
Comment
The report is extremely detailed, giving information and findings, but interestingly, there is one paragraph which is somewhat understated:
Mind-set, aptitude, capability and capacity all influence the approach taken by micro-employers in terms of how they run their payroll and meet their PAYE obligations.
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