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Opposition builds to Conservatives’ radical plan

Opposition by payrollers is building to the radical plan by the Conservatives to centralise the PAYE process.

Under the proposal, revealed by what appeared to be a deliberate leak to The Daily Telegraph, the responsibility would be carried out by an automated bank-based system. The Tories are already in the process of developing a pilot of a system that would see ‘automatic deductions of tax and National Insurance from employees’ gross pay’. This, the Conservatives say, would save businesses up to £5.5 bn and increase revenues for the Exchequer of £1bn.

Jeanette Hibbert, payroll manager, said: ‘I have never heard of anything so ridiculous in all my life - how on earth do they think they can keep the costs down by bringing all payroll work into the Government?

‘Can they keep the KPI's that most organisations insist on, such as payroll accuracy of 99.5%?

‘What about all of the voluntary deductions, some of which affect tax, such as Give As You Earn, and salary sacrifice schemes and Attachment of Earnings Orders, that employers administer?

‘How will the HMRC know which benefits need taxing? Will there actually be a requirement for employers to retain a payroll department – I can't see a way around this – and that being the case, where is the benefit?

A public sector payroll manager said: ‘It is scary that an organisation that is so large, and gets things wrong on a frequent basis, can even be considered for such a task on this scale. Private sector, public sector, and differences between police, ambulance, NHS and local government terms and conditions to name but a few, will be a minefield for errors, then add on the onshore, offshore, fishing and construction industry quirks and hey presto - a "one stop shop"? Very scary.’

But David Gauke MP, Shadow Treasury Minister, told the Telegraph: ‘The cumbersome system is a significant burden for employers, HMRC and taxpayers. We urgently need to look at moving to a real-time PAYE system where income tax and NICs are deducted automatically as gross salaries are paid.’

The Institute of Payroll Professionals (IPP) was more guarded in its comments. Karen Thomson, IPP head of policy and strategic visibility, said: ‘My research shows that calculating PAYE and NI is not a problem for business; the areas of concern are around benefits and expenses and understanding the rules of when something is or isn’t taxable and the method by which it is reported.’

Critics of the current system say that it is ill equipped to cope with the often complicated ways in which people earn money and for those who have more than one source of income; indeed the Public Accounts Committee estimated that a backlog of 17 million PAYE cases had yet to be addressed. The National Audit Office last year estimated that 4.5m people paid too much tax under PAYE and 1.5m not enough.

01/03/2010