According to a recent report from HM Revenue & Customs (HMRC), micro businesses are struggling to comply with payroll reporting requirements under real-time information (RTI) because they lack support, which is leading to errors.
The report, entitled Managing Pay as You Earn (PAYE) in real time; challenges faced by micro-employers, found that the owners of micro organisations, meaning those who employ 10 or fewer employees, lack understanding of how PAYE should be managed, particularly about what should be done and by when. This means they make more errors than the owners of larger businesses and end up paying penalties for non-compliance and late filing.
The key finding was that the micro-employers interviewed did not view PAYE management as integrated into the payroll process and that many do not see it as a coherent, end-to-end process at all, but as a set of discrete and dissociated tasks.
The report states that there are mixed levels of understanding about how things should be done and little knowledge of where to get information when non-routine issues, such as maternity leave, arise.
Furthermore, the micro-business owners surveyed said they believe HMRC’s support material to be ‘difficult to navigate and understand’ so prefer to learn as they go, which is where errors creep in.
However, the report also blames micros and agents, saying that their misunderstanding of RTI reporting is ‘exacerbated by their own behaviours, such as lack of checks and low prioritisation’, which also contribute to errors in RTI submissions.
The report concludes that HMRC should focus on better and clearer support rather than providing more of it. This includes having more available resources, such as a guide that takes micro employers through the entire process, highlighting key requirements and providing a summary of important dates.
Penalties should also be clearer and more consistent with explanations about why the penalty has been received and how to prevent it from occurring again.