In an exclusive article for Infologue.com, Tim Rosser looks at HMRC’s new Real Time Information (RTI) system and wonders if the security industry is ready for it.
Tim writes: “Like so many other business sectors the private security industry is currently operating under a back-drop of reducing margins. The old business maxim, ‘cash is king’ has never been more appropriate.”
“With the abdication of many banks and asset funders from the UK SME lending market, many security businesses have become used to using HMRC as the bank of last resort. Not surprising when you consider the constant and massive impact of PAYE and VAT commitments on cash flow management in this sector.”
“We’ve often been called into advise where PAYE arrears have accumulated because businesses have failed to pay the right amount of monthly PAYE on account, submitted their annual returns in April and then negotiated a tax time to pay deal over the following 6/12/18 months with respect to the arrears that have mounted.”
“Well, HMRC have recently decided that enough is enough. Under a new system, called Real Time Information (RTI), employers must now send HMRC monthly details of how much each employee has been paid and how much tax has been deducted under the PAYE system. The new scheme starts in April.”
“And here’s the rub, in a recent survey 46% of small companies had ‘never heard of RTI’ while 81% said they were ‘totally unprepared’ to deal with the necessary changes.”
“These figures are very concerning. There appears to be tremendous ignorance that the days of companies being able to use the ‘Bank of HMRC’ have finished. We can only conclude that with the continuing non preferential creditor status of HMRC, tax collectors will be hot on the heels of defaulting companies far quicker than used to be the case.”
“Security businesses must build this new reality into their cash flow forecasting models.”
Are you ready?
Tim Rosser is the owner of Turning Circle Solutions Limited, a firm of business and tax advisers. Named as one of the 100 most influential people in the business turnaround profession, Tim has a particular interest in helping SMEs deliver their potential. For further information see www.turningcirclesolutions.com.