Real Time Information and the cash flow implications
The main focus of publicity regarding HMRC’s Real Time Information (RTI) has been the administrative burden it will impose on small businesses up and down the country. Under the scheme, from 6 April 2013, all employers are required to file information with HMRC relating to payments under the PAYE system as soon as they have been made.
HMRC has provided limited short term relief by allowing those employers with less than 50 employees to delay filing the relevant information until the end of the month in which the payment is being made. Welcome though this may be in taking some pressure off employers while they get used to the system, it is only a short term respite and does not address other key impacts of RTI.
A significant impact upon many businesses struggling with their cash flow is that HMRC will have full details of employee deductions when returns are filed. Consequently, those employers who have either previously delayed payments or made payments on account and catch up with arrears when filing their annual return will no longer be able to do so.
For those businesses who have historically used such debt to fund their businesses, even on a short term basis, this practice will become increasingly difficult. HMRC using either their powers of distraint, or simply by issuing winding up petitions, are likely to seek to target businesses who fail to pay the funds to them by the due date. It will therefore be essential for businesses who in the past may have used HMRC to fund their working capital to reconsider their cash flows to ensure they will not get caught out by the forthcoming changes.
Date: 5th April, 2013
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