The Chartered Institute of Taxation have responded to governmental plans to overhaul, and subsequently improve, the PAYE system for employers and employees as discussed in the HMRC-published paper ‘Improving the operation of Pay As You Earn’.
This paper suggests the introduction of ‘Centralised Deductions’ and a process by which information flows more frequently between employers and HMRC resulting in ‘Real Time Information’ being available to the taxman.
Tax Policy Director at CIOT, John Whiting, commented: “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.”
He continued: “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. The real benefits of real time information would only be seen if the system became truly interactive and allowed three-way communication and data transfer between employers, HMRC and employees. We are a long way from that.”
Concluding the CIOT stance on these proposed changes and raising concerns about the risks involved, Mr Whiting said: “The proposal for centralised deduction of tax by HMRC should reduce employers’ admin burdens, but raises many other issues. Having the wages of every employee in the country passing through one huge data processor is high-risk and many people would be concerned by the prospect of their wages passing through the Government’s hands. HMRC’s help and advice services would need much greater resources if they are going to have to field the enquiries about deductions currently being fielded by employers.”