Reforms to the PAYE system are being rushed through at too quick a pace, it has been claimed.
The Chartered Institute of Taxation (CIOT) has said that plans for a new ‘real time’ IT project could adversely affect both employers and employees.
The CIOT made its criticism as part of its response to a Government consultation on plans to require employers to submit Pay As You Earn (PAYE) information to HMRC in real time from April 2012.
In the view of the CIOT, the timetable is insufficient if the systems of both HM Revenue and Customs (HMRC) and employers are to be properly developed and tested.
Anthony Thomas, the CIOT’s deputy president, said: “This project has potential – but it also has the potential to go horribly wrong and, if this happens, the impact on business will be huge.
“The original focus of the Real Time Information (RTI) proposal was the desire – shared by all – to reduce administrative cost, for both employers and HMRC. The CIOT was supportive of this but reserved judgement until more detail was provided, because of concerns about the potential administrative costs of RTI for employers.
“The consultation document acknowledges that many respondents to the previous discussion paper said introducing RTI from April 2012 was far too soon, so it is surprising that RTI is proceeding on this basis.
“We are particularly concerned that the short timeframe in which RTI is being introduced will lead to significant administrative burdens for employers and uncertainty for employees.”
The CIOT also voiced worries about the security of the data transfers to HMRC under RTI.
In its response, the CIOT recommended a longer testing and evaluation period in which to develop the required IT systems.
The CIOT believes that lessons need to be learned from the implementation of other projects such as iXBRL for corporation tax, and that the RTI system should be running for at least 12 months before becoming compulsory.
The CIOT also proposed that there be a phased introduction of RTI over a number of years, as it applies to compulsory filing of end-of-year returns and in-year forms.