HMRC are currently consulting on their proposed changes to the PAYE system which would see the implementation of a centralised IT system which would calculate PAYE automatically.  This would take the process of salary payments out of the hands of employers.  However, a warning has been issued by Giant Group that contractors and freelancers could be left considerably out of pocket if these proposed changes go ahead.

Giant stated that the very nature of working flexibly means that individuals can change jobs frequently.  This, in turn, leaves them vulnerable to over-payments of tax particularly if the calculations are automatic.  Under the proposals, employers would make gross payments to HMRC who would then be at liberty to make deductions before passing the net pay onto employees.

Matthew Brown, Giant’s managing director, acknowledges that there are existing problems within the current system, with “increasing numbers of workers paying the wrong amount of tax”.  HMRC have come under fire recently as it emerged that £334 million has been overpaid by taxpayers during the last two financial years.

Responding to the proposals for a centralised tax system, Mr Brown commented: “The proposal that a centralised computer should be responsible for the entire UK workforce is a chilling prospect when you look at HMRC’s track record in this area.  The PAYE system was designed for a time when people changed jobs far less frequently than they do now.  An error by a centralised computer could leave millions of workers unpaid or taxed the wrong amount.”

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