A poll of 1,700 small firms found that only 16% of respondents were fully aware of the 'Real Time Information' (RTI) programme and a quarter (25%) had never heard of it, despite it being critical to the success of Universal Credit, which is a new welfare benefit in the UK that will replace six of the main means-tested benefits and tax credits.
RTI is a new programme designed by HMRC to gather regular information about employees. It aims to simplify reporting new starters and leavers as well as make the payroll process simpler and less burdensome. It will also support the payment of Universal Credits to those who receive them.
Two-thirds (66%) of respondents to the FSB's survey are not confident that RTI will achieve these aims.
With less than six months to go until businesses have to comply with the new rules, more than 60% of firms surveyed say they have not had any communication from HMRC about the changes.
Businesses think that learning new processes (33%) to deal with the changes as well as dealing with potential enquiries and inspections from HMRC (24%) will pose a challenge.
John Walker, national chairman, Federation of Small Businesses, said: "With only six months until RTI is due to be implemented, the FSB has real concerns that not enough businesses are aware that it is just around the corner.
"This system is linked to the Government's flagship Universal Credit scheme and we're concerned that it could flop if Government does not step up its game in communicating the changes."
Shadow work and pensions secretary Liam Byrne said: "Let's be very clear if this problem for firms isn't fixed soon, then millions risk seeing vital benefits disappear into a black hole, with catastrophic consequences.
Walker added: "Without adequate communication and education from Government, small firms won't be able to prepare. It just isn't fair if they're then penalised for not complying."
A spokesman for HM Revenue and Customs said: "We intensified our RTI communication drive a few weeks ago, as customer research shows that six months before it starts in April 2013 is the best time to engage with employers."
He added: "The campaign includes sending over 1.4 million letters to employers, targeted flyers and emails, advertising, regular live Twitter Q&As, YouTube videos and roadshows across the country."
New claimants will be able to make claims for Universal Credit from October 2013, while existing claimants will be moved onto Universal Credit by the end of 2017.
The figures are based on an online poll of FSB members, carried out by Research by Design, between 16 and 23 October 2012, which received 1,645 responses.
