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HMRC proposes fines for small firms neglecting PAYE returns

Small firms may soon be subject to thousands of pounds in fines for neglecting their PAYE tax returns, according to statements made by Her Majesty’s Revenue & Customs.

Small businesses, sole proprietors, and even contractors or freelancers will soon face having to make real-time reports through specialised computer software in order to keep HMRC apprised of any earnings. Failure to do so could see small firms subject to more than £2,000 in fines on an annual basis, with larger companies having to pay even more, with only personal carers working in private homes or those who have religious incompatibilities with using online communication exempt from the new rule.

The Forum of Private Business has criticised the move, with the Forum’s Phil McCabe stating that HMRC’s track record with electronic communications – which includes a long history of website glitches and computer problems – will leave many astounded and with disbelief at such a ‘backwards step.’ A requirement to file PAYE in an exclusively online environment or face massive fines will only make a time-consuming and frustrating process that much more unpalatable, Mr McCabe added.

The new arrangements will require employers to file taxation and pay details for all employees whenever their wages are paid instead of at the end of the tax year, the biggest PAYE shake-up since 1944, when the system was first founded. The new changes are set to go into effect by October of next year.

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