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ACCA's response to the consultative document Developing A Payroll Service For Small Businesses issued by the Business Link Directorate is set out below.

We are grateful for the opportunity to comment on the consultation document and will be pleased to participate in any further discussions. Our comments follow the same order as that of the consultation paper

Section 1 Introduction
Section 2 Proposed Method Of Delivery
Section 3 Eligibility
Section 4 Other Issues

General

The consultation document is the first official document we have seen which "indirectly" admits that the PAYE system is too complex and burdensome. We also consider the document to be set out in a logical and well written form.

Forward

We are pleased to see that a very much more professional approach is being adopted for the response process in terms of comments being possible by telephone in addition to e-mail and fax.

 

Section 1
Introduction

Objective

There needs to be a concerted effort to simplify the PAYE system. It is not a long-term solution to merely make a one off payment to people who set up small businesses without addressing the underlying problems and in fact continue making the system ever more complex.

We would find it useful if there were a more detailed annex attached of the Bath Study as even the £288 compliance cost per employee of the 1 - 4 member business seems low.

The consultation process

There is clearly a great urgency in implementing additional systems to help small businesses with their payroll compliance. We are not entirely sure why a great deal of background research should be necessary in determining whether payments should be made to small businesses. Surely if the take up is optional, and a study has already been conducted of the compliance costs that small businesses encounter, then it would purely be another potential help available to them.

 

Section 2
Proposed Method Of Delivery

2.1 We agree that the running of a payroll service by the Small Business Service (SBS) would be unwelcome and another layer of bureaucracy. It will be better all round to allow the existing market in such services to make the provision.

2.2 - 2.5 The assistance should be broad based and not exclude the acquisition of manual systems. There is a clear need for small businesses to adopt new technology and use computers but the best initial system may well be a manual one. We discuss our views below on which types of qualified accountants should be authorised.

2.6 - 2.7 We agree that the cost of using third party specialists should be subsidised. We also agree, strongly, that only qualified accountants should be covered by the voucher scheme and this should refer specifically to CCAB member body accountants. It is important that there is not a greater exclusion to the point of actually having named individuals or firms on a list as this could prove totally disastrous for those qualified accountants who are excluded in a similar way to shops which fail to win a National Lottery franchise. Hence in helping one set of small businesses another set end up being adversely affected i.e. the small firms of accountants. In addition we can agree that the subsidy should be available on a broad spectrum of products and services.

2.8 The value of the voucher should be such that it reduces the "penalty" of the higher compliance cost burden of small businesses to that of the one which employs between 500 and 1000. This would warrant a voucher of £259 per employee (£288 - £29) however, we appreciate that this is likely to be totally unacceptable from a funding point of view hence a voucher of £259 value per business may be realistic.

The value of the voucher should not be restricted on the basis of the type of service which is acquired by the business. The full amount should be given and any surplus could be used on other trade services for instance if the business needed to upgrade software or add a new piece of hardware such as more memory to their computer. This type of expenditure is going to be a real possibility in view of the ever increasing rules and regulations affecting businesses.

2.9 - 2.12 While we consider it important that the software and payroll bureau services that are listed as suitable for small businesses under this voucher system should conform to high standards and perform certain specific tasks we are concerned that again the market and the viability of businesses which are excluded will be adversely affected. Thus a broad based "kite mark" system may be the best approach. We would thus endorse the thinking in paragraphs 2.11 and 2.12.

In terms of the desire to increase the awareness and use by small businesses of new technologies one way forward maybe to offer them advise and information at the same time that Government agencies visit the organisation, such as for paye or vat. This may mean that two people attend, the second being an information technology specialist. Clearly the proprietor of a small business has no time to spare researching new technologies thus he will only listen to those he has a statutory obligation to listen to. If this suggestion is followed then it must not be pursued in a time consuming burdensome manner, from the small business point of view.

The main problem with such a suggestion is that it may well lead to too many such visits in order to keep the small business upto date or insufficient "on time" advise as the visits are too far apart. In which case it maybe necessary to set up a "paye IT unit" or "vat IT unit" which will pay a regular, for example, once a year visit and will purely seek to inform and not carry out any compliance tests.

 

Section 3
Eligibility

3.1 - 3.7 It is difficult for us to comment on a precise size of a business for inclusion within the scheme. We are in favour of a widely drawn definition for a small business which will capture as many as possible. At the same time we do not consider that a restriction to only recent start-ups is welcome. All small businesses are in a difficult position and need help.

We agree that businesses that have to deal with "difficult" paye areas such as WFTC should be helped specifically. It maybe that there needs to be help in addition to the voucher scheme by the Government perhaps exempting them from having to deal with the area and instead it being dealt with "off-payroll" by the benefits agency.

In order to promote the payroll service details should be sent out with Self-Assessment tax returns, as well as the other methods mentioned, where the individual receives the trading income pages.

3.8 We can see instances where local delivery would be better than national except that national delivery would probably allow greater uniformity of service.

 

Section 4
Other Issues

We have already commented earlier on some of the issues raised in this section hence we make no additional comments however, we have a concern that has not been raised elsewhere. We seek clarification that the vouchers will be outside the scope of tax. We consider the benefit of the voucher will be significantly diminished if its value has to be deducted from a business expense or capital asset for tax purposes.

We thank you again for the opportunity to comment and look forward with interest for future developments.

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