SMALL businesses in South Devon are unaware of major changes coming to the way they deduct tax from employees' pay packets, according to the Federation of Small Businesses.
In a new report, the FSB revealed that a quarter of businesses do not know about the biggest change to the PAYE system for 60 years, which will come in effect from April.
It said that in a survey of 1,700 small firms, only 16 per cent of respondents were fully aware of the Real Time Information programme – a new flagship way of reporting payroll.
An additional 25 per cent had never heard of the programme, despite it being crucial to the government's successful introduction of Universal Credit.
The FSB has expressed concerns about a 'serious lack of communication' between the government and small firms ahead of the change.
RTI is a new programme designed by HMRC to gather regular information about employees. It aims to simplify the payroll process, while supporting the payment of Universal Credit to those who receive them.
But two-thirds of respondents to the survey expressed doubts that the programme will achieve its aims, and more than 60 per cent of firms said they have not had any communication from HMRC about the changes.
A third of respondents said that learning new processes to deal with the changes would pose a challenge to their business.
The FSB's Devon chairman David Shephard said: "With only six months until RTI is due to be implemented, the FSB has real concerns that not enough businesses are aware that this is just around the corner.
"This system is linked to the Government's flagship Universal Credit scheme and we're concerned that it could flop if government does not step up its game in communicating the changes.
"There are a number of steps that a business must complete before they can provide Real Time Information to HMRC so it is critical that those affected know about it. Without adequate communication and education from government, small firms won't be able to prepare."
Accountancy firm Bishop Fleming has also warned of the implications for thousands of small businesses.
Its payroll service business development manager Lee Hellingsworth said: "What is prevalent is that many businesses in the South West are currently unaware of a major change to the PAYE system.
"For some it will be a totally new way of administration. And while small businesses can take advantage of the HMRC online tools, for bigger firms it could mean additional costs – either having to purchase RTI compliant payroll software or outsourcing their payroll.
"We are currently making our clients aware of the changes and their options. Prior to each business deciding how it will manage RTI, first and foremost, they will need to cleanse their payroll records to ensure the records held will match what HMRC are holding.
"Otherwise they could face RTI file rejections and possible HMRC fines, once RTI is implemented."