Improving the operation of PAYE

payrollpro

Hello readers,

HMRC has released a consultation document called Improving the operation of PAYE and this proposes radical changes to the way PAYE income tax and NIC is computed and paid, could also affect the way net pay is paid to employees.

The idea is to centralise this process at hMRC with employers/agents sending the gross data to them immediately and for HMRC to compute the correct income tax and NIC with an interim measure whereby the banks carry this out for HMRC.

Interested, then go to the HMRC website, consultations and look at the proposals.

The AAT must respond to this by 23 September and we need your views urgently, whether you are a payroll provider or the in house payroll person. Respond to this thread or contact me at ian@thelimepartnership.co.uk with your views but i will need your name and membership number.

Payrollpro

jenny3549

Huh? Why on earth would we want to do that? Payroll software is pretty advanced these days making it almost impossible to inaccurately calculate net pay no matter what the circumstances. I used to run the payrolls for our entire group of seven companies with hundreds of employees, four different pensions schemes and numerous other company loans etc and I can't imagine ever thinking passing gross data to HMRC would be a good idea - just the opposite in fact, I wouldn't trust them to get it right!

Steve Collings

I am sorry but this proposed system by HMRC is doomed for disaster.

HMRC are not capable of basic administration including the calculation of tax codes. How on earth could we trust them with a calculator to correctly compute the amount of tax/NICs?

An extremely worrying proposal....

Rozzi Rainbow

I am an MAAT employed in practice and deal with our clients payroll. Thank you for bringing our attention to this Ian - like Steve I find this extremely worrying, as does my boss (who is the practice owner).

I can see where HMRC are getting at with needing to receive information more quickly mid year but the new proposal seems to be going from one extreme to the other and taking things much too quickly. I think it would be feasible for us to send mid year returns - ie quarterly or monthly for larger companies when the payments are made. If current software was developed to allow us to send mid year returns as per the current end of year, this would allow for any tax coding issues and problems to potentially be resolved before the year end. Yes it would mean more work throughout the year, but hopefully less work at the year end as most will have been done already. This would also help with needing to know employees' income for benefits etc.

The second part of the proposal is absurd - as Steve has said, are HMRC actually capable of doing this? Not by current standards. Would they be able to process the information quickly enough to allow staff to be paid weekly? And what about the employees having any queries? This implies that employers/agents/bureaux aren't able to process PAYE efficiently!

I can understand why they feel they need to improve the system, but to me it seems only a small percentage of taxpayers are affected by having an incorrect tax code, and to make changes this drastic would affect the majority who currently have no problems with the system as it is.

Ian - I will PM you my membership details.

payrollpro

Rozzi,

One point, I think you are spot on, whatever happens we will have monthly or quarterly returns of PAYE as one result, probably just like VAT, so that HMRC can match payment with liability, something they cannot do now and as a result cannot reasonably prosecute employers who underpay their PAYE.

All - thanks for these comments so far, everyone else, keep them coming, if you want us to represent you we need your input.

Ian Whyteside
Payrollpro

stevef

Its not April the first yet! Is it?

A-Vic

I remember the mess of CIS monthly returns and i really hope they at least attempt to get it right first time and make a lot more phone lines avaliable as shown with the tax credit and VAT phone line problems have recently shown and the lack of information.

A-Vic

Am not a MIP but do deal with payroll and the other mentioned

jow774

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ConsultationDocuments&id=HMCE_PROD1_030623&propertyType=document

Just found this.

jenny3549

Scary, really scary! If the long term part with the centralised deductions happens I honestly can't see it being anything but a disaster. Can just picture my employees querying their pay and me telling them to contact HMRC!!!!

jow774

And each employee has to wait the statutory HMRC telephone time of approx 1 hour before they get through, lol.

payrollpro

Hi everyone,

Thanks for the comments so far but I want to pick up some remarks on two issues, firstly is anyone planning to go to the free HMRC sessions on the subject and secondly how are payroll people and providers going to be affected by "real time data exchange".

If there is no centralisation we will have to do this and whilst we can hope Sage and Iris,etc, will make the necessary changes to do instant EDI I cannot see this as being guaranteed and what about those not using commercial software?

Come on guys, lets have your views on this.

Payrollpro

deanshepherd

Having read HMRC's proposals I saw no suggestion that gross pay figures would be submitted to them centrally for calculation. As far as I understand it, rather than clicking 'submit P35' once a year we will be clicking that button after every payroll run. On the face of it that does not seem like a huge problem.

My concerns are based around HMRC's reference to notifying them "at the point of making the payment".

Firstly, I tend to run payrolls mid month. I may not even know the actual pay date. Am I supposed to then log back in and submit all the data once I know everyone has physically been paid?

Secondly, I may not even know if someone has been given an advance on their salary and I may have alterations to make after the payroll has been run for any errors or omissions relating to sick pay, holiday or bonuses/overtime.

Reporting such changes to HMRC on a regular basis could be fraught with difficulty. You certainly can't resubmit electronic P45s, P46s or P35s at the moment if errors are subsequently found.

I understand HMRCs desire to have the information quicker, but 'Real Time' is probably a step too far.

I would happily accept quarterly reporting (by the 19th) for those entitled to pay PAYE quarterly and monthly reporting (by the 19th) for everyone else providing the new process did not come with a whole raft of penalties for non-compliance. After all, it should only be the click of a button!

payrollpro

Thank you to everyone who took the time to repond to this. I know we are all busy and I expect this affected the numbers of people who could respond, however the comments I have had will help me as I compile the official AAT response over the next few days.

There are a lot of us working in payroll, taxation and providing services to employers and we can influence government policy if we make sure our voices are heard. Someone else is, I know, compiling an official response to the consultation document on Furnished Holiday Lets so if you work on these perhaps you would let member services know your views, or send them to me and i will pass them on. We have until 22 October to respond to that one.

The PAYE proposals are in fact a fundamental change to PAYE and will affect every employee, employer and payroll agent, probably more so there will be other chances to have our views put forward.

Thanks again,

Payrollpro

zara5034

When are the seminars? Have they been abd gone?

And where are they, I'm in Cornwall which is usually miles away from these sorts of things.

Cheers