Wed, 1 Jun 2011

Concern over rush to real-time reform

HM Revenue & Customs is rushing to Real-Time Information (RTI) reform with an approach that could lead to an increase in bureaucracy for employers and the Revenue itself, warn industry payroll experts.

Simon Parsons, committee chair of IReeN, the user group for electronic exchange between employers and HMRC, and Karen Thomson, head of policy at the Chartered Institute of Payroll Professionals, have both raised concerns.

Parsons said: ‘The plans could lead to increased record-keeping, with trying to monitor every cash transaction to the employee, including non-taxable elements such as expenses. The ultimate plan is to tag tax and National Insurance [NI] information to BACS payments to employees, known as Centralised Deductions. Yet non-cash taxable features such as share options are by definition not in the BACS payment.

‘It makes BACS a very difficult channel,’ he said. ‘Payrolls often don’t interact with BACS at all: they pass a file that creates a credit. Credit files are not structured into PAYE structures; they are based on payments.’

Thomson said: ‘Our engagement is with the employee. The duty to the Revenue is a small part of that. That’s one of the reasons we oppose Centralised Deductions. Tax and NI are just a small part of what we do.’

Thomson criticised the requirement to include deductions from net pay, which also raise data protection concerns.

A spokeswoman for HMRC said: ‘The Revenue needs to know about other deductions from net pay in order to assess whether the RTI data reported matches the amount paid.’

Peter Seymour, head of government and public service at VocaLink, which runs the BACS infrastructure, said the planned system ‘allows payment to have with it relevant tax information, and for payment to go in without tax information’.