By Marcus Leach
According to an Intuit poll of small business owners, two thirds (69%) say the burden of PAYE puts them off hiring employees.
The admission came as the deadline passed for all employers to file their PAYE end of year returns (P14/P35s). Nearly a half (45%) of small business employers polled said they were unaware of the deadline for late-filing. A quarter (28%) said they didn’t expect to complete their return before the deadline, therefore risking being fined.
Mark Linton is a small business owner who set up an events company, The Business Growth Show, in 2005. He said: “One of the key challenges for any small business right now employing staff is not necessarily actually the process of getting a staff member on, it’s once you got them on, how do you pay them, are you doing it right, is legislation getting in your way.
"I really do think that PAYE for any small business is a logistical nightmare. It’s actually forcing me in my business to go the opposite way, to look at growing my business through franchise opportunities, which means that I no longer need to look to employ masses of staff because I don’t need the staff, I’m actually looking to employ businesses to take on those areas.”
Diana Flier, Tax Analyst, Intuit UK, said: “Small business employers want to do the right thing, file accurate returns and of course avoid any penalties, but they struggle to keep on top of all HMRC’s requirements. Staying compliant can be daunting, but using payroll software alleviates much of the administrative burden. For example, QuickBooks Payroll automates the calculation of NIC and PAYE deductions, reducing the time and knowledge required. It also makes it easier and quicker to file returns online — a requirement for all employers.”
All employers who have had to maintain a P11 form, or equivalent payroll deductions record, for at least one employee during the tax year must complete and file an Employer Annual Return. The penalty for late filing will be calculated at £100 per 50 employees for each month, or part month, that the return is late, so the longer the delay in submitting these returns, the greater the fine will be.
In previous years, penalties were not issued if returns were received within seven days of the deadline date. This concession was introduced to avoid employers being penalised if HMRC received their return late due to reasons such as postal delays. However, as all returns are now processed online, and Contractors are no longer required to file end-of-year CIS returns, the concession has become redundant.
It’s not just late-filing penalties that small businesses have to worry about. With HMRC’s proposed compliance checks on SMEs, it’s more important than ever for employers to keep accurate employee records - if they don’t, or do not retain records for long enough, they may be charged a penalty of up to £3,000.