Thu, 2 Sep 2010

Planned reform of PAYE ‘will not save money’

The Government’s planned overhaul of the PAYE system ‘will not save money’, the institute of Payroll Professionals (IPP) has warned as it gathers feedback from members.

Head of policy Karen Thomson welcomed the planned switch to real-time information, shared between employers and HM Revenue & Customs.

But she added: ‘Based on anecdotal evidence,the IPP at this stage supports real-time data, although there will be operational issues that need to be resolved; however, we do not at this time support central collection as we do not
believe it will save business money, nor will it save HMRC money.

In fact, we believe it will increase costs for both as the main issue for employers is determining what is subject to tax and NI, not calculating the tax and NICs.’

Jeanette Hibbert, payroll manager at food giant Kerry, said that the gross-to-net calculation, which is the part the government wants to move from employers to a central system, is only a small part of what payroll and HR systems do. She added that the annual P11D means that real-time information would not be complete, unless this system is reformed and benefits are payrolled.

There will be a deadline of 23 September for consultation on a radical plan to overhaul the Pay As You Earn system.

The plan is that gross-tonet calculations would be carried out by HM Revenue & Customs and processed through the banking infrastructure, rather than by individual employers, under a system called Centralised Deductions (see exclusive interview with David Gauke MP, cover feature, Payroll World April 2010).

The Government argues that this would make it easier to ensure individuals pay the right tax, possibly removing the eed for P45/P46 system; more accurate payment of means-tested benefits and tax credits, plus other administrative benefits, the Treasury says. Administration for people with more than one job should be simpler, as there would be one central record for each individual.