At www.bestonlineaccounting.co.uk 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 www.bestonlineaccounting.co.uk 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.