It follows weeks of criticism from business organisations that have accused HMRC of a lack of effective communication about what is the biggest overhaul of the Pay As You Earn (PAYE) reporting system since it was introduced in 1944.
RTI is the new online system that all businesses that employ staff will have to use to report employee payroll information to HMRC. Rather than reporting deductions, such as tax and National Insurance Contributions (NIC) at the end of the year employers will now have to report them each time they make a payment.
The system was due to be rolled out, starting with small businesses, from 6 April with compliance mandatory by October 2013, but in a surprise announcement this week HMRC said that businesses with fewer than 50 employees would be exempt from the changes until 5 October. Until then they will be allowed to report PAYE information by the date of their regular payroll run but no later than the end of the tax month (5th).
A spokesman said: "HMRC recognises that some small employers who pay employees weekly, or more frequently, but only process their payroll monthly may need longer to adapt to reporting PAYE information in real time.
"HMRC will continue to work with employer representatives during the summer to assess and understand the impact of RTI on the smallest businesses and consider whether they can make improvements to real time reporting which will address their concerns without compromising the benefits of RTI or the success of the Universal Credit."
The Forum for Private Business welcomed the move. "Nobody likes last minute changes, and this development perhaps hints at something of a panic at HMRC that many, many small firms still aren’t fully prepared for RTI," a spokesman said.
"However, this does seem the sensible course of action, because a tax system in meltdown come April is in nobody’s best interest, and no doubt many firms will now be breathing a sigh of relief. It will though now add another layer of confusion around a subject which is already as clear as mud to many SMEs."
He added: "HMRC don’t have a great track record for communicating well with business, is this yet another example?"
BPIF chief executive Kathy Woodward said it was obvious that some publicity had gone out but that it had "not had the desired result".
She added: "I haven't heard any printers say they haven't heard of it... I have plenty say they wish they hadn't heard of it.
"In reality many of these will be micro businesses and UK Government still doesn't get that for many of these small owners administration in any shape is an anathema."
Meanwhile printers have welcomed a new employment allowance, which will be delivered through RTI, announced in this week’s Budget. From 2014 employers will get the first £2,000 taken off their NIC bills.
Announcing the move chancellor George Osbourne said that for example an employer could take on a member of staff on a salary of £22,000 and pay no NICs.Tweet
