Small firms 'unaware' of tax repercussions of major welfare changes

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A quarter of small businesses are completely unaware of changes they will have to make to the way they report tax deductions, research suggests.

The new system is needed to calculate payments for the government's planned Universal Credit.

From next April employers will have to report national insurance and income tax deductions every time they pay staff, not just at the end of the year.

The Federation of Small Businesses said the move must be communicated better.

Data about people's income will be used to calculate payments of the new Universal Credit, which is to wrap together six existing benefits.

But less than six months before the new system, called Real Time Information (RTI), is supposed to be up and running, a Federation of Small Businesses' (FSB) survey of its members suggests a quarter had never heard of the scheme.

Of those who were aware of its existence more than half had not received any information from HM Revenue and Customs.

'Black hole'

John Walker, the FSB's national chairman, said: "This system is linked to the government's flagship Universal Credit scheme and we're concerned that it could flop if government does not step up its game in communicating the changes."

For Labour, the shadow work and pensions secretary Liam Byrne said: "Let's be very clear, if this problem for firms isn't fixed soon, then millions risk seeing vital benefits disappear into a black hole with catastrophic consequences."

A spokesman for HM Revenue & Customs said its communications campaign was stepped up just a few weeks ago and the system was on track and pilots were going well.

He said: "We intensified our RTI communication drive a few weeks ago, as customer research shows that six months before it starts - in April 2013 - is the best time to engage with employers."

He added: "The campaign includes sending over 1.4 million letters to employers, targeted flyers and emails, advertising, regular live Twitter Q&As, You Tube videos and roadshows across the country.

"RTI is on track and the pilot is going well. Nearly two million individual records have been successfully reported in real time by over 1,800 PAYE schemes so far."

The HMRC recommends employers check their employee data, check that their software will be upgraded in time and discuss arrangements with their accountant or book keeper.

New claimants will be able to make claims for Universal Credit from October 2013 while existing claimants will be moved onto Universal Credit by the end of 2017

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