Cost of operating PAYE in real time hurting smaller businesses

The cost of Real Time Information (RTI), a new HMRC payroll process introduced in April which all firms with employees have to use, is only adding to the pressures small businesses face.

Research from the Forum of Private Business showed firms are paying 11% more to external providers of payroll and tax support compared with two years ago.

And the Forum believes that the RTI requirements are the cause of the problem.

The Forum's policy adviser Robert Downes said: "Our research shows little has changed in terms of what's costing small business the most for compliance costs. The stand-out surprise though has to be the huge increase in spend on external contractors.

"We believe this is largely down to RTI, and firms having to pay a payroll specialist to manage their employees' PAYE bills, but by contrast businesses are paying out slightly less on internal compliance managed in-house.

"The logic here seems to be to pay an expert to do a job they can no longer do themselves, for whatever reason that may be."

Prior to RTI being launched in April, HMRC anticipated the cost to small business at £120m, while the Forum research puts the figure at more than double that at £311m.

There was some good news when it came to health and safety, with internal costs here falling slightly since 2011, according to the Forum's data.

It said this was also likely to fall further after October's Common Commencement Date when sweeping changes to workplace health and safety are implemented.

"The changes in October should really see H&S costs come down as the onus shifts to employees having to take more of a responsibility for their own safety in the workplace, and the end of strict liability for employer will mean firms can't be held responsible for accidents beyond their control," said Downes.

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