Real Time Information to affect 'digitally excluded' SMEs

HMRC's introduction of Real Time Information (RTI) will cause problems for small employers that lack internet access or are not computer savvy, a tax advisory body has warned.

According to the Low Incomes Tax Reform Group (LITRG), HMRC's assessment of the impact of the new system - designed to make the process easier, more accurate and reduce HMRC administration costs - has not gone far enough.

HMRC's impact note on RTI identified that 'care and support' employers and those in rural locations with poor broadband services would potentially encounter difficulties. But the LITRG argues that it did not take into account the extent to which 'digitally excluded' small employers such as older people, those with disabilities and those who cannot afford the cost of computer equipment, broadband subscriptions and the requisite training would find RTI a significant problem.

Under RTI, employers will need to inform HMRC about employee tax and other deductions under the PAYE system as and when an employee is paid. A pilot project for the scheme involving around 300 employers was launched earlier last month, and RTI is gradually being phased in with the intention that all employers will have switched by October 2013.

Commenting, LITRG technical director Robin Williamson, said: "We are also concerned about the extra burdens that RTI will impose on small employers when they start having to transmit information to HMRC either before, or at the same time as, they pay their employees."

"This requirement is bound to impose extra burdens on the smallest employers who because of the nature of their businesses may have to make payments to their employees at more frequent intervals, sometimes at weekends."

The LITRG now believe HMRC must make reasonable adjustments in order for its impact note to be compliant with the Equality Act 2010.

HMRC is to monitor and evaluate the introduction of RTI throughout the pilot period, and independent research will be conducted to quantify the impact on customers, including the time and cost involved.