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Compliance costs ravaging contractors and other sole traders

Whilst the Government says it’s going to be reducing their focus on following legislation, contractors and sole traders are suffering from compliance costs.

In fact, despite Government assurances the annual compliance bill for small-sized firms (including so-called ‘micro employers’ like freelancers, contractors, and other sole traders) has gone up by £713 says the Forum of Private Business. So what’s been driving this new influx of compliance costs? Well the FSB says that the blame can be laid squarely at the feet of the Real Time Information PAYE system.  RTI has been a thorn in the side of small businesses since its inception last year, and while there was enough of a furore on the part of small firms for the Government to institute an extension for these smaller businesses before adopting the standard. Though now that the extension ha come and gone it’s no surprise that there are all sorts of problems happening even now.

RTI is of course a major burden for anyone who doesn’t have a massive payroll department with dozens of accountants working at their beck and call. Sure, larger firms have been able to take the new regulations in stride but when it comes to small and medium sized businesses, all bets are off. The whole idea behind RTI might have been laudable, at least from the point of view of the Government – requiring employers to collect and submit payroll taxes and National Insurance payments at the time of every pay period instead of the end of the year – but in practice it’s a logistical nightmare. In order to comply with RTI, an employer has to electronically submit the information to the Treasury through the use of specialised payroll software, and that means firms that had incompatible software had to upgrade – and at their own cost no less!

Collecting payroll information this way might result in more accurate taxation at the end of the day, but the trade-off in pain, frustration, and now added costs for sole traders and small business owners proves that the whole thing was just a terrible idea. Though, as it seems with all sorts of terrible ideas that have been put forward by those in power, RTI is most likely here to stay as well. Brace yourselves!

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