Nannytax on BBC News 24 - tax credits a burden for many employers
The program highlighted the problems of cost and hassle put on small employers and businesses through the administration of tax credits.
The working tax credits were introduced to enable parents working part-time or on low income to benefit even if they only work a few hours a week. The way the system is currently set up means that the employer first pays the tax credits to their employee, and the Inland Revenue later reimburses them for this cost.
A recent study from the University of Bath shows that the cost of administrating tax credits can add up to 10% of a company's total payroll costs. As the Government keeps revising the amount of payments due, employers have to frequently reprogram their payroll. Small employers and businesses cannot afford this added hassle and are now demanding that the Government pays for the cost of implementing the tax credits.
Helen Harvey, Head of Payroll Services at Nannytax told BBC News 24 reporter Karen Bauman, “Of all the different parts of legislation that have been introduced in recent years, the tax credits cost us by far the most in man hours.” Many of Nannytax's clients employ nannies that receive tax credits. Helen continues, “because employers of nannies are classed as small employers they must first be funded by the Inland Revenue in order to pass the credits on to the nanny. But when the payments don't come through on time from the revenue the parents have a real dilemma on their hands. Should they not pay their nanny the credit she is entitled to, knowing that she will struggle that week, or should they pay her out of their own, often tight family budget, and wait to be reimbursed by the Inland Revenue?”
In the past it has often taken weeks to rectify any problems related to incorrect payments with one of the main reasons for this being that there wasn't a dedicated phone line for employers to call with their problems. Says Helen, “as a result of lobbying by Nannytax a phone line has now been set up and problems can be dealt with more effectively.”
The Chancellor Gordon Brown has indicated that he is considering paying the working tax credits directly to the employee in the future – a move that would no doubt be welcomed not just by Nannytax, but also by many small businesses across the UK.