SMEs not happy with new PAYE conditions

Next year the Government is planning real-time collections of Pay As You Earn (PAYE) payments by enforcing the rule that businesses pay their staff using the Bankers’ Automated Clearing Services (BACS) system. However, business groups are demanding that the Government rethink this proposition over concerns that smaller firms would lose out as a result.

These business groups include the North East Chamber of Commerce (NECC) who, supported by the Federation of Small Business (FSB), has written to HM Revenue and Customs (HMRC) asking that the plans are reconsidered.

In this letter, the NECC outlines potential issues that would result from the new regulation and offers alternatives that would decrease the impact on small businesses who are already under pressure as a result of the current challenging economic environment.

Ross Smith of the NECC fears that the proposed changes will unduly burden businesses and negatively impact on their cash flows.

Smith also called on the Government to abandon plans to force the use of the BACS systems and also suggested that employers be allowed to submit PAYE details in arrears.

The NECC would also like HMRC to scrap plans for centralised transactions which would detrimentally affect the relationship between employees and employers.

Policy head at FSB North East, Simon Hanson, said that the Government should reconsider these new PAYE regulations if their aim is economic recovery led by the private sector. Hanson also said that economic growth cannot be achieved by placing additional burdens on smaller firms. The focus of the Government should rather be job creation in these smaller firms to grow the North East economy.

According to the NECC, the BACS implementation could result in illicit labour agreements but tempting businesses to hire cheap, temporary labour resulting in the Treasury losing out on revenue.