The introduction of Real Time Information (RTI) for PAYE is being billed as a positive step for all — making it easier for HMRC and employers to operate their PAYE systems. How difficult the transition will be remains to be seen but it is a significant change that every UK business needs to understand and prepare for.
Under the current system — which has remained pretty much unchanged since 1944 — employers are only required to send information about their employees' PAYE and NIC deductions at the end of the tax year. From 2013, they’ll have to do this every month — when they pay their staff. This migration process will take place between April and October 2013.
But businesses need to prepare for the change now.
Is your data accurate?
An important step, according to payroll software specialist Sage, is to make sure your records are 100% accurate. Sage provides nearly half a million employers in the UK with payroll solutions and it has been working closely with HMRC since RTI was conceived.
The wrong data about your staff, it warns, can cause inaccurate tax calculations or HMRC compliance checks.
The vast majority (80%) of data problems, according to HMRC, are concerned with inaccurate information about staff — names, dates of birth and NI numbers.
Its records show that 824 employees had the surname “unknown”, for example. 507 employees are called “A N Other” and over 2,000 have an NI number of AB123456. In addition, some 40 employees on payroll records purported to be over 200 years old!
Recording employee information for RTI
Sage has come up with a useful list of dos and don’ts to help businesses prepare:
• enter the employee’s full forename and surname
• enter a double-barrelled surname in full
• only enter an employee’s correct National Insurance number
• enter the correct date of birth in the format DD/MM/YYYY
• use “known as” names such as Bob instead of Robert or Sam instead of Samuel
• enter an initial in either the forename or surname boxes
• make up an NI number
• enter a default date of birth such as 01/01/1901
There’s more advice on data quality on the HMRC website.
Sage has produced a series of guides and webinars as well as access to training on RTI to help businesses prepare.
• After this blog was published, HMRC announced a "relaxation of reporting arrangements for small businesses". According to HMRC: "Until 5 October 2013, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5th)."
Britain's high streets could be pulled back from the brink of extinction by a new wave of entrepreneurs. Hope for our high street is provided by new research published by Sage, which suggests that one in five people planning on starting a business would open a retail shop on the high street. That number rockets to 47% for those planning on launching a service-based business.
The YouGov Entrepreneurial Britain study was conducted as part of Sage's Discover Your Business Potential campaign and surveyed 3,329 respondents. It aimed to shed light on how many people are planning on setting up a business in the UK, where these businesses will be and in what sectors. Its findings suggest that:
High street shop closures have impacted town and cities across the UK, with an average of 14 shops closing a day at worst. The north east of England is the area hardest hit, with 15 per cent of retailers closing. However, Sage's research suggests that things are looking up for the region. The North East has the highest number of people planning to start a business, with retail again being the most popular choice (22%).
The research suggests there is light at the end of the tunnel. Everyone has business potential and it’s encouraging to see so many people set to launch a new venture in the next couple of years. Whether it's the Mary Portas effect or not, without doubt, there is hope for the UK high street.
Entrepreneurial spirit in the UK is thriving, with one in four people wanting to start a business, according to new research published by business software and services provider Sage.
The study also suggests that the country’s current economic dependence on the South East will start to move northwards, with the North East set to become the recognised home of UK start-ups over the next two years, as people take greater control of their future.
Up to 500,000 new businesses are starting each year in the UK, with about seven in 10 owners starting up because they want to be their own boss. According to research by The Global Entrepreneurship and Development Index and Imperial College Business School, the UK scores fifth in the world for its level of start-up activity. This is largely because of its share of technology sector start-ups and the quality of resources in start-up firms.
While the British economy may have slowed down in recent years, British entrepreneurs refuse to let their ambitions slide. Manufacturers, internet-based start-ups and retailers are all well represented in the UK’s small business landscape. Prime Minister David Cameron recently said: “Small businesses and entrepreneurs are the lifeblood of the British economy and I am determined that we, working with the private sector, do everything we can to help them to start up and to grow in 2012.”
However, potential entrepreneurs should be aware of the numerous challenges involved in starting up and growing a profitable business before committing to launching a business idea. Pressures include:
With proper preparation, determination and a clear vision, entrepreneurs can successfully overcome these challenges. As Michael Hayman, co-founder of Start Up Britain, summarises: “All around the country people are proving that you can make it in Britain, be your own boss and create jobs that can help transform communities.”
Brendan Flattery, managing director of Sage’s Small Business Division, answers some key questions about the importance of maintaining healthy cashflow.
“Any successful small-business owner will tell you that healthy cashflow is critical to the smooth running and growth of their business. It’s been a challenging time for all businesses recently, regardless of size, and one that will have a lasting impact on the way businesses structure and manage their operations. One of the key lessons that many small businesses have taken from the recession is the importance of healthy cashflow.
“Put simply, cashflow is the movement of money within a business, but this seemingly straight forward concept can have detrimental effects if badly managed.”
“Healthy cashflow is vital for all businesses, but the consequences of not managing it effectively can quickly have a massive impact. A small business can only survive for a limited period with a negative cash flow. Ultimately, the business will end up insolvent, which means it will fail because it won’t be able to pay its creditors.”
“Cashflow forecasting software is an important business tool that can not only show payment patterns and forecast the year ahead, but also highlight re-occurring late payments.
“It’s been widely reported that most failed businesses have closed because of problems caused by inefficient cashflow management rather than anything else. If small businesses put into practice the correct processes they will be able to manage their financial planning effectively, forecast the year ahead and identify any potential cashflow issues early enough. Then they can take action to avoid any anticipated downturns. More effective cashflow management will help stabilise the business, as well as ensure the business emerges from the recession in a stronger position and cash positive.”
“Julia Boggio Photography is a Sage small business customer. The business has experienced first hand why accurate cashflow forecasting is a must. They used Sage 50 Accounts forecasting tools. MD Julia Boggio says:
‘When I was reviewing our cashflow forecasts in November of last year, I could see there was a dip due in February. We reorganised our finances, cutting down on advertising and came up with an alternative contingency plan, which we put in place. This ensured we were well positioned to account for the dip and even enabled us to have a better February than the previous year.”
“More than half of the 2,000 small businesses polled by Sage in our monthly Omnibus survey said they had been impacted by late payments over the past year. The Department for Business, Innovation and Skills reported that more than 4,000 businesses failed in 2008 solely because of late payments.
“It is critical that start-ups and all other businesses to remain aware of exactly how much money they are owed and when payments are due. This helps to prevent late payments in the first instance. However, if they do occur, good management can ensure that they do not have a damaging effect on the business’s overall cashflow. These are all aspects that business accounting software can help you get to grips with.”
“Make sure all your employees – if you have any – are kept informed about the state of the business’s cashflow. This will hopefully prevent them from making purchases your business cannot afford. At times you might be waiting for a large invoice to be paid, so you may have to put spending plans on hold.
“Create accurate cashflow forecasts for the year ahead. It will enable you to plan for the future. Forecasts allow you to identify potential cashflow crises, for example, be identifying periods when your costs exceed your revenue. At such times, your business might need to seek financial help. To be fore warned is to be fore armed.”
Brendan Flattery is the Managing Director of the Small Business Division at Sage UK and Ireland