Businesses are calling for an overhaul of the tax credits system in order to relieve the burden placed on bosses.

In a report, by the Federation of Small Businesses (FSB), the lobby criticises the government for failing to act on proposals chancellor Gordon Brown made during last year’s budget speech.

Brown said that working tax credits should be paid direct to claimants by the Inland Revenue, rather than by employers, a proposal that the FSB claims has yet to come into fruition.

The FSB believes that administering benefit payments such as tax credits and Statutory Maternity Pay places a huge burden on small business employers, with many unable to fall back on separate payroll departments.

Nine out of ten families with children can get tax credits. However, you don’t need children to qualify.

They are designed to help people on low incomes whether they are employed or self-employed and can include support for qualifying childcare and maternity.

Help is also available for people working 30 or more hours per week, people with a disability, or people over 50 who recently returned to work after a period on benefit.

The FSB believes that such benefits should not be dealt with by employers.

Neil Hamper, FSB tax chairman, said: “At the last budget, the Chancellor said that he accepted the case for the Inland Revenue paying the working tax credit directly to claimants. But almost one year on we still have no idea when this change will take place.

“The FSB is taking the Chancellor to task because the state, not employers, should pay benefits. Not only has the government let empoyers down by failing to act, it has also disappointed employees, many of whom object to their boss knowing their personnal information.”

In a budget submission the FSB also call on the chancellor to:

  • Take back responsibility for paying Statutory Maternity Pay so that it is paid directly to mothers by the government
  • Overhaul inheritance tax so that no tax is paid on estates worth less than £350,000
  • Ensure that measures to improve access to public sector contracts for small businesses are not undermined by the government drive to cut costs and rationalise its supplier base