THE BLOG

Real Time Information - Still the SME Sector Is in the Dark and Implementation Date Looms

11/03/2013 12:49 GMT | Updated 03/05/2013 10:12 BST

The biggest change to the PAYE system since it came into operation over 65 years ago - Real Time Information (RTI) is the new system for reporting tax, NI and other details to HMRC and comes into effect in April.

Reporting in real time will be mandatory for all businesses; yet research AAT conducted last month with 1,000 SME decision makers, managers and directors nationwide highlights that there is still a huge lack of clarity and understanding about RTI.

As an accounting body with over 125,000 members around the globe, we have a responsibility to keep our members informed of changes proposed and implemented by HMRC. With many of our members being concerned about the overhaul of the PAYE system, we are well aware of the impact RTI will have on business owners that are not prepared.

Surprisingly I think we expected more small business owners to be at least aware of the introduction of RTI by now. But our research clearly indicates that this isn't the case with one in three SMEs remaining completely oblivious.

Immediate problems will become apparent for those businesses that haven't checked their internet access first off. Is it good enough to provide information in real time? Then there will be the issue of software and payroll. A staggering statistic from our report indicates that a third of SMEs have no idea if their payroll or software could cope and report in real time.

This is a concern for the small business sector as there will costs attached for businesses that need to upgrade their software or payroll. Also there could be a cost on resource if employers have to retrain staff to use new payroll and software platforms.

Then there is also the issue of ensuring that all organisations' data is properly cleansed. If data is incorrect this will cause problems, such as having incorrect tax which could lead to compliance checks from HMRC.

As our economy currently flat-lines and David Cameron states that SMEs, startups and entrepreneurs are vital for the future of our country, it does seem that the implementation of RTI will hit the SME community the hardest. Many businesses don't understand the legislation and don't have the resource to invest time to be fully prepared for the changeover.

The penalties for making errors could be onerous. HMRC does have an awareness campaign running that was launched in October last year but our research shows it hasn't reached the businesses out there that would benefit from it the most. This means that HMRC helplines are going to be inundated with enquiries and queries as April looms adding a massive administrative cost for both businesses and HMRC.

The introduction of RTI will come at a time when the SME community is already feeling the pressure. 20% say they are worried about business survival in 2013.

In the current economic climate, we surely want to be stimulating growth to help incentivise the small business sector, a major change like RTI is a huge burden on the SME sector when they need support and guidance.

So with a month to go until RTI comes into play, it looks as if the April implementation date will cause some immediate chaos.