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Cash flow effect of RTI

19th Mar 2013
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At we are well aware that that many companies have to manage their cash flow on a daily basis and continue to struggle to fund any increases in payroll costs and are now having to contend with HMRC being aware in real time of their PAYE/NIC obligations; a liability that was previously only established after the year end.

Some companies/businesses traditionally used  this fact as of a cheap form of finance only paying the liability when demanded by HMRC. This will become more problematic under real time information which is widely acknowledged to be the biggest shake up in PAYE for many year.

HMRC's view is that having a more efficient real time system will save employers £300m a year in administration costs and speed up the collection of billions of pounds owed to them during the tax year.

However, Tina Riches from the Chartered Institute of Taxation has said that  employers caught unaware will have a "nasty wake–up call" when HMRC debt management officers contact them if they no longer pay their PAYE/NIC liabilities on time commenting that "Real Time Information could soon become the Route to Insolvency."

HMRC remain confident that their computer systems remain robust, and to be fair to HMRC those in the RTI system so far have many positive comments to make, albeit they tend to be larger organisations with dedicated payroll teams.

At we remain hopeful that there will be an overall benefit from the new system albeit the previous year end reconciliation process has been replaced with more paperwork involving weekly or even daily submissions of data.

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By MarionMorrison
19th Mar 2013 18:24

Ignoring the blatant advertising

Are there really a lot of employers who create cashflow by consciously underpaying their PAYE and then paying a massive M13 amount?  If there are then they deserve everything they get.  

But then what do I know - I got a junkmail approach today for the idea that we should utilise the VAT that passes through our hands in order to generate better cashflow and then they would fund us so that the VAT actually got paid.  Madness.

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Replying to Accountant A:
By [email protected]
20th Mar 2013 10:21

PAYE/NIC liabilities...


Having undertaken tax due diligence led assignments for nearly 20 years I can confirm that invariably the main area that causes deals to fall over is in respect of PAYE/NIC led liabilities.


Corporation tax liabilities tend to be well understood and quantified/provided- whilst PAYE/NIC liabilities lie lurking for the due diligence team to discover;often going back 6 years with interest and penalties often looming........


Over the last few years when the downturn has hit lots of businesses; cash has been hard to manage and struggling businesses have often turned to a unapproved deferral of PAYE/NIC as a cheap way to finance their business (they also turn to VAT-but the penalties here are more severe and Customs generally more on the ball).


We would never recommend this deferral approach; but yes lots of businesses have gone down this route- something which will now be harder to do.

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