According to national accountancy chain, UHY Hacker Young, the government has collected £737 million from investigations into tax avoidance and employer compliance errors. Interestingly, £373.4 million (50.66%) of that has come from SME’s despite them only making up 11% of the UK tax payroll. So it’s clear that SME’s are disproportionately under paying payroll tax due to both deliberate avoidance and arguably more likely genuine employer compliance errors.
So why are SME’s owing the most payroll tax despite them only making up 11 percent of UK’s payroll? Well, we suspect there are two major reasons which are both interrelated.
The first reason is that as it stands the government has an overly and some may say unnecessarily complex employer compliance tax system. This system is made even more complex for SME’s as they are the company’s more likely to employ casual labour and have flexible workforces, making it extra difficult to accurately determine which payroll tax bracket portions of their labour force fall in to.
The second reason is that, unlike larger companies, SME’s often lack the financial means to hire or consult with tax experts and accountants that can help them navigate the complex tax system, which is made more complex by SME’s often having a more mixed workforce as opposed to larger companies with a larger proportion of standard full time, permanent salaried employees. And unlike larger companies, a large proportion of SME’s lack the funds to hire their own payroll staff which would ensure all tax documents are accurate and submitted in a timely manner.
There is a workable solution for SME’s however. Outsourcing payroll to payroll companies that specialise in helping SME’s. Outsourcing to a payroll company in this manner is more cost effective than hiring or consulting with individual tax and payroll specialists and a lot more cost effective than hiring an in house staff member to handle taxes and payroll.
So if you are an SME that is looking for companies to outsource your payroll to it is crucially important you work with a company like ours that specialises in helping SME’s and that has a good history of doing so.
Having us handle your payroll will not only be the most cost effective option, but due to our extensive experience of both the complex tax system and how the tax system relates specifically to SME’s unique hiring techniques, we will ensure that your payroll forms are submitted on time and are accurate., thus preventing you getting any HMRC penalties.
As small to medium businesses continue to experiment with different types of labour and increase the mix of labour they have in their organisations and as the tax system increases in complexity the benefits of outsourcing payroll become stronger and more attractive. Is 2017 the year you outsource your business’ payroll and give yourself one less thing to worry about?