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New study reveals many small businesses still unaware of impending RTI changes

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New research carried out by the Forum of Private Business has shown an increased awareness among small firms of the Real Time Information system being introduced by HMRC in just two months' time.

The Forum's latest quarterly Referendum study carried out amongst its members, showed that while the majority of firms now understood the implications of RTI, a worrying number were still in the dark.

RTI is a new payroll system being introduced by HMRC in April that will affect all business with paid employees.

The Forum's latest research conflicts with similar studies by other professional bodies which have shown much higher number of businesses unprepared or even aware of RTI.

The Forum's Chief Executive, Phil Orford, said: "Real Time Information is looming and while our research suggests there is a growing understanding of what this means for businesses, there are a significant number still ignorant and unaware.

"The other important issue raised by our research is the huge lack of confidence small firms have in HMRC to cope with the changes – 65% of businesses expressing concern at this.

"If nothing else, this paints a depressing picture of small firms' confidence in a government department that is key to their operations. Those businesses involved with the RTI pilot run by HMRC last year were a little more confident here, but there are clearly still fears about how seamless the transition will prove to be."

But he added: "The positive news though has to be that compared to earlier studies carried out just a few months ago, more than two thirds of small businesses now know what's expected of them. While it's likely this is in part because of the work we've carried out with our own members to raise awareness of RTI, it still suggests the message is slowly getting through."

The Forum research also saw many firms question the benefits of RTI. Just under half of respondents did not see any benefits, while 1 in 5 felt the scheme would make them less likely to take on employees. 

Added Orford: "With this uncertainty in mind we are calling for HMRC to adopt a sensible and reasoned approach towards enforcement in the early stages. Already the government has announced the delay to some fining powers, but the effect of the switch to online reporting must not be underestimated, nor the cost of investing in new software ignored. Ideally we want to see a moratorium on fines in all but the most serious cases."

The research was part of a wider investigation into the way small businesses use technology, and if or how they plan to use future technologies such as super-fast broadband to help them trade more profitably.

It showed that when it came to investing in technology most firms (35%) were looking to spend on existing systems to get them working better. A significant 31% were not looking to invest at all in the coming year.

There also appears to be apathy around cloud computing and mobile technologies. Business owners are split around the benefits of cloud computing, with 27% supportive and 26% suggesting the disadvantages outweighed the benefits.

The main disadvantages highlighted were data security (33%), lack of understanding (31%) and connectivity issues (23%).

Almost half (44%) of businesses felt 4G mobile technology would have only a slight effect on the way businesses operate, with just 4% of the opinion it would be significant. 34% felt it would make no difference.

One in four businesses mentioned that improved broadband speed was the key support needed by businesses.

However, e-invoicing appears to be catching on with SMEs. 47% of businesses reported they would use e-invoicing when dealing with some or all of their customers by the end of the year, although 38% had no plans to use it.

At 21%, linking e-invoicing to current credit control procedures was the most frequently cited barrier alongside the need to link with other software. Figures were higher than suggested by other research, indicating growth in the market and the fact that our members have more formalised processes than most SMEs.

The impact of e-invoicing; whether it would improve or hamper prompt payment depended on anticipated usage, with those looking to send e-invoices to all customers tending to indicate that this would improve prompt payment, whilst those more likely to receive e-invoices (i.e. those who do not currently use them) least likely to see it as a benefit.

"The government's Digital by Default agenda means that more and more government services will be provided primarily – or solely – online over the next few years. While there are of course immense opportunities here, from innovative use of new government data to create apps, to potential cost cutting for smaller businesses by automated invoicing services, it is clear there is also a huge culture change needed amongst a wide demographic of businesses.

"The message to business is clear: get on board or get left behind.

"When it comes to cloud computing, the needs of our members seems clear: speed and reliability over space. It is no secret that superfast broadband in the UK is coming online quite slowly in some regions. Whilst we welcome the £530m allocated in the current spending review to stimulate investment in rural communities even in London 1 in 5 Forum members still report connectivity issues.

"The 4G licences due to be granted shortly will improve that capacity by the summer but coverage remains an issue. If we are going to mandate businesses to carry out some services online and if we want to encourage greater tech start-ups then we have to get serious about providing that capacity.

"When it comes to e-invoicing, the benefits to a business of such a system are well known to effectively tackle late payment by customers. Take up appears reasonably positive among SMEs. 47% reported that they would use e-invoicing by the end of the year.

"If the government can tackle the biggest barrier of interoperability with credit control procedures then this figure is likely to jump much higher."

Media contacts

John Walding

01565 626 016

john.walding@fpb.org

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