Payroll changes could cause admin headaches for bosses

NORTH EAST businesses must be prepared for changes that will affect the way they manage payroll if they want to avoid an admin headache, according to a leading regional accountancy and business advice firm.

Clive Owen & Co LLP is warning the region's businesses that a new measure to simplify employee payments and taxation will mean notifying HM Revenue and Customs (HMRC) every time they pay staff - as opposed to filling in annual employee returns.

HMRC is modernising its PAYE system to prevent a repeat of the problems that have led to over 6m people receiving letters advising them that their tax contribution for 2008-09 and 2009-10 was incorrect. There is expected to be further confusion next month, when around 17m P9s, which give notice to employers of employee tax codes, are issued by the department.

Angela Cammock, senior payroll services manager at Clive Owen, said: "HMRC is making a number of changes to the way that it processes tax and deductions, in a move to collect real time information.

"In the medium to long term, the changes will mean that businesses will be required to process all pay electronically, using a system like BACs, to ensure that HMRC can instantly track pay and ensure that the right deduction is applied."

RTI which is expected to come into force in 2013, will mean that businesses have to submit information every time they do their regular pay run for employees. The new process will mean that annual employer returns can be phased out; HMRC will be able to update records when a tax payer changes employers, removing the need for employers to fill in P45 and P46 documents; and HMRC will no longer need to wait until year end to identify underpayments.

She added: "Businesses really must look at their pay systems and ensure that they take steps to future-proof them. RTI means that it will no longer be acceptable to submit employee contributions annually, at year end, and for businesses that are ill-prepared, they will face an administrative headache when trying to change their systems to meet new requirements when the new measures take effect."

January 28, 2011

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