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The complicated Pay As You Earn system prevents two thirds of small businesses hiring employees, according to an Inuit survey. The increased burden of PAYE administration has resulted in hesitancy among small employers, with some being unaware of the revised timetable for PAYE.

Almost half of all small businesses that took part in the survey were unaware of the deadline for submitting end of year returns under the PAYE system. Forms P14 and P35, which give pay and tax details at the end of the year, must be submitted to HM Revenue & Customs by 19th May each year. Self assessment tax returns were also a problem for some employers, with 28 percent knowing that they would be unable to meet the deadline for filing, which are 31st October for paper returns and 31st January for online returns.

Hiring employees requires a knowledge of relevant legislation to comply with HMRC and rules regarding terms of employment. The complicated nature of PAYE, with deadlines for filing, associated costs for an employer and compliance can hinder the progression of a business. The survey shows that a number of small businesses would have to outsource their administration, especially if they are looking to develop their company by taking on new employees.

Not complying with HMRC legislation in a timely manner, may result in penalties being received, plus interest to be paid on any outstanding amounts owing to the taxman. The survey results show that a number of small businesses remain wary of hiring new employees, in order to avoid the complications of PAYE.

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