10p tax compensation will be ‘administrative headache’ for businesses

Plans by chancellor Alistair Darling to compensate low-paid workers in the wake of the 10p tax ‘fiasco’ could wreak administrative havoc on small businesses, it has been reported.

The plans, dubbed a ‘humiliating mini-budget’ by shadow chancellor George Osborne, will see out-of-pocket employees given £120 each by the government.

The proposals will also see thousands of small businesses forced to change PAYE codes and tax systems halfway through the administrative year.

And while thousands of workers will be slightly better off than originally planned, the compensation package is still not enough to make up for the cut in their take-home pay.

The proposals also mean the money will only go to the lowest paid workers – leaving those earning more than £10,585 out of pocket.

Stephen Alambritis, a spokesman for the Federation of Small Businesses (FSB), told The Times the plans could cause a headache for many small businesses.

“We’ve always suggested the best way forward on helping low-paid workers is through a healthy increase in allowances. Nevertheless, this change halfway through the fiscal year will cause problems for small employers in particular.”

Peter Spencereconomic adviser to the Ernst & Young Item Club, told The Guardian the effects of the proposals were going to be ‘very costly’.

“It comes at a time when [the government] has no money. The cupboard is completely bare,” he said.

© Crimson Business Ltd. 2008