Government proposals to improve the operation of PAYE – particularly the ‘ultimate goal’ of centralised deductions – merit further exploration, the Chartered Institute of Taxation said.
But the tax body would want HMRC to be confident that ‘some real challenges’ concerning the new National Insurance & PAYE Service (NPS) have been addressed, and that the NPS is ‘working to maximum efficiency and seen to be working’, before HMRC embarks on another major IT project.
The ICAEW Tax Faculty cast doubt on HMRC’s ability to deliver ‘even on its existing commitments’.
HMRC’s consultation document ‘Improving the operation of Pay As You Earn’, available at www.lexisurl.com/kOs2e, set out proposals for the collection of 'real time information' and, in the longer term, a system of centralised deductions.
Centralised deductions (CD) Centralised deductions is a radical option but ‘does seem to be the answer for some employers’, the CIOT argued in its formal response. ‘It would take away the administrative burden on employers to compute tax deductions and place that burden where it belongs, with HMRC.’
However, the ICAEW Tax Faculty dismissed the idea. ‘We cannot see how CD is a practical proposition,’ it said.
‘CD would involve HMRC itself running payrolls for in the region of 60 million employees. Leaving aside the costs to HMRC of setting up and running such a system, distributing pay and payslips to employees on their normal paydays and accounting to employers for the monies remitted, having adequate staff to enable speedy manual intervention where necessary and answer queries from employees which would formerly have been handled by employers, we think that the implications of systems error or failure on a such a business-crucial database catering for 60 million taxpayers is a risk that the Government should not countenance,’ the Faculty added.
The CIOT warned that the system would involve significant challenges for HMRC, including the need to process information in very short timeframes and the requirement to build a calculator that could perform millions of calculations ‘without fail and with 100% accuracy each month’. Many employees would be concerned about their wages passing through either the Government’s or a third party’s hands.
The CIOT suggested ‘centralised calculations’ as a possible alternative to CD. HMRC would do the calculations but would then ‘simply notify the employer as to what deductions to make and the employer would make those deductions as it does now’.
Real time information (RTI) The real benefits of RTI could only be achieved if the system became ‘truly interactive, allowing three way communication and data transfer between employers, HMRC and employees, and operated in real time,’ the CIOT said.
‘The fundamental aim in this area has to be to get PAYE deductions to be more accurate so that the numbers of taxpayers over and underpaying each year are significantly reduced, said John Whiting, the CIOT’s Tax Policy Director.
‘The idea of information flowing from employers to government as soon as circumstances change, rather than being reconciled at the end of the tax year, is a seductive one, but this proposal would be likely to load additional costs onto employers, particularly those who do not currently use electronic methods for paying their employees.’
‘Serious concerns’ The ICAEW Tax Faculty said: We believe that HMRC should consider how it can improve the tax system generally and the operation of the PAYE system particularly. As blue sky thinking, the ideas in the condoc are in our view worth considering as part of trying to help PAYE better to do its job of getting tax and NIC calculations more or less right in year.
‘However, in the real world and given recent events, we have serious concerns about the ability of HMRC currently to deliver even on its existing commitments, let alone on what is proposed in the condoc. We believe that the department should concentrate on rectifying existing problems and ensuring that systems work properly, with minimal error rates, before introducing further radical changes.’
Government proposals to improve the operation of PAYE – particularly the ‘ultimate goal’ of centralised deductions – merit further exploration, the Chartered Institute of Taxation said.
But the tax body would want HMRC to be confident that ‘some real challenges’ concerning the new National Insurance & PAYE Service (NPS) have been addressed, and that the NPS is ‘working to maximum efficiency and seen to be working’, before HMRC embarks on another major IT project.
The ICAEW Tax Faculty cast doubt on HMRC’s ability to deliver ‘even on its existing commitments’.
HMRC’s consultation document ‘Improving the operation of Pay As You Earn’, available at www.lexisurl.com/kOs2e, set out proposals for the collection of 'real time information' and, in the longer term, a system of centralised deductions.
Centralised deductions (CD) Centralised deductions is a radical option but ‘does seem to be the answer for some employers’, the CIOT argued in its formal response. ‘It would take away the administrative burden on employers to compute tax deductions and place that burden where it belongs, with HMRC.’
However, the ICAEW Tax Faculty dismissed the idea. ‘We cannot see how CD is a practical proposition,’ it said.
‘CD would involve HMRC itself running payrolls for in the region of 60 million employees. Leaving aside the costs to HMRC of setting up and running such a system, distributing pay and payslips to employees on their normal paydays and accounting to employers for the monies remitted, having adequate staff to enable speedy manual intervention where necessary and answer queries from employees which would formerly have been handled by employers, we think that the implications of systems error or failure on a such a business-crucial database catering for 60 million taxpayers is a risk that the Government should not countenance,’ the Faculty added.
The CIOT warned that the system would involve significant challenges for HMRC, including the need to process information in very short timeframes and the requirement to build a calculator that could perform millions of calculations ‘without fail and with 100% accuracy each month’. Many employees would be concerned about their wages passing through either the Government’s or a third party’s hands.
The CIOT suggested ‘centralised calculations’ as a possible alternative to CD. HMRC would do the calculations but would then ‘simply notify the employer as to what deductions to make and the employer would make those deductions as it does now’.
Real time information (RTI) The real benefits of RTI could only be achieved if the system became ‘truly interactive, allowing three way communication and data transfer between employers, HMRC and employees, and operated in real time,’ the CIOT said.
‘The fundamental aim in this area has to be to get PAYE deductions to be more accurate so that the numbers of taxpayers over and underpaying each year are significantly reduced, said John Whiting, the CIOT’s Tax Policy Director.
‘The idea of information flowing from employers to government as soon as circumstances change, rather than being reconciled at the end of the tax year, is a seductive one, but this proposal would be likely to load additional costs onto employers, particularly those who do not currently use electronic methods for paying their employees.’
‘Serious concerns’ The ICAEW Tax Faculty said: We believe that HMRC should consider how it can improve the tax system generally and the operation of the PAYE system particularly. As blue sky thinking, the ideas in the condoc are in our view worth considering as part of trying to help PAYE better to do its job of getting tax and NIC calculations more or less right in year.
‘However, in the real world and given recent events, we have serious concerns about the ability of HMRC currently to deliver even on its existing commitments, let alone on what is proposed in the condoc. We believe that the department should concentrate on rectifying existing problems and ensuring that systems work properly, with minimal error rates, before introducing further radical changes.’
