We were recently advised by local accountants Charlton Baker Ltd that the tax man is about to land employers with another administrative cost. Contrary to the Government's pledges to relieve small business of red tape this seems like a further outsourcing of a HMRC problem to the private sector.

Here's what Charlton Baker Ltd have to say:

"Currently, employers are required to file an annual PAYE return, form P35, with HMRC containing details about their employees' earnings during the tax year, along with information about the amount of income tax and National Insurance contributions (NICs) deducted from the employees' salaries. This return is due on 19 May following the end of the tax year to which it relates. As the return is not filed until after the end of the tax year, but salary payments and deductions are made on a monthly basis during the tax year, errors in the PAYE code, leading to incorrect amounts of income tax being paid, are not discovered until well after the end of the tax year.

The solution - Real Time Information (RTI)

Under RTI, it is proposed that employers and pension providers would be required to file monthly PAYE returns containing similar information to the current form P35. These returns will be filed on-line at the point employers pay their employees, rather than after the end of the tax year, as under the current system. This would be extra work for payroll administrators.

The Government believes that RTI will make the PAYE system more accurate for individuals, resulting in fewer bills and repayments being sent after the end of the tax year, as reconciliations can be performed, and PAYE codes corrected, in real-time.

The major disadvantage will fall on employers. In particular smaller employers will suffer a disproportionate share of the software and other administrative costs to convert to electronic processing of payroll data.

A pilot programme will run from April 2012. All employers will be expected to apply RTI from October 2013."

Charlton Baker Ltd are happy to talk to any small business owner or taxpayer who would like more information on this topic.