HMRC launches second stage of PAYE consultation

HM Revenue and Customs (HMRC) has published a new consultation document on ways of improving the PAYE system.

It follows on from an initial document issued back in July and forms the second stage of the Government’s plans for reforming the PAYE regime.

The latest document focuses on ‘real time information’. Under the system, employers would send HMRC information about tax and other deductions from employees’ pay when, or before, they make the salary or wage payment to the employee, rather than sending returns at the end of the year.

HMRC said that the majority of responses to the first consultation favoured a move to a real time method of collecting information.

The latest consultation document concentrates on responses to the July document and is looking at ways of how best to implement a real time system.

The Institute of Directors (IoD) welcomed the broad direction of the consultation document but raised some reservations.

The employers’ group expressed concerns that centralised deduction still remains on the table as an option for the future.

The IoD said that centralised deduction would pass over, from the employer to someone else, responsibility for working out how much tax to deduct from pay.

This, the IoD argued, would blur the lines of responsibility, allowing employees to hold their employers responsible for any mistakes.

Employers should always have the option of controlling payments to HMRC, the IoD continued.

While the Government only wants employers to submit, in real time, information that is already collected, the IoD voiced wariness over the suggestion that information which is currently collected for purposes other than PAYE might be needed.

Richard Baron, head of taxation at the IoD, commented: “Overall, this is a sensible document. We support real-time information, which has the potential to reduce bureaucracy and to facilitate reform of the benefits system.

“But we must be very careful about the details. There is always a danger that extra burdens will be imposed on employers for the convenience of officials. They will think, let’s collect some extra data (like hours worked) while we’re at it, so we can monitor everything more closely. And we repeat our call to reject the very foolish option of centralised deduction.”

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