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Prepare for ‘massive’ PAYE changes while you can

Begin preparations now for the ‘massive’ PAYE changes that are set to go into effect in April of next year if you don’t want to encounter some even bigger issues with the employee taxes they report and pay.

Her Majesty’s Revenue and Customs will be introducing the new Real Time Information system from April of 2013, which means that companies will have to make Pay As You Earn reports every time one of their employee gets paid instead of just once a year. This new system, which is the largest change in a number of years, could cause plenty of confusion for any company caught unawares before the April deadline.

The new system is supposed to streamline the PAYE process for HMRC and eliminate errors when it comes to taxation. However, many accountants are concerned with the economic impact on smaller firms, as specialised payroll software will be required to comply with the new RTI scheme – another extra cost in an economy that’s already recovering quite sluggishly.

It’s true that, in the long run, the new PAYE system will lead to greater accuracy in tax reporting and fewer headaches for employers, but only once the infrastructure has been put in place. In the shorter turn, the transition to the RTI system requires a massive effort on the part of employers to make sure their payroll data has no errors and complies with the new format used by the Real Time Information system.

No firm will be untouched when it comes to either updating their existing payroll software or having to go out and begin the transition to learning a completely new payroll system. Underestimating the new RTI system will be disastrous for any business that does so.

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