Finance professionals and contractor accountants do not believe that the government’s proposed plans to overhaul the PAYE system are satisfactory.

Last week, HMRC released plans for the significant reform of the PAYE system since its introduction 66 years ago. With the new system, employers would remain responsible for the calculation of NIC, PAYE and student loan deductions and that information would be sent to HMRC via the BACS system when the employer runs the weekly or monthly staff payment run.

One of the fears amongst tax experts is that the Revenue is not famed for successfully implementing new IT systems. The most recent example being the chaos that ensued earlier this year when taxpayers were sent incorrect coding notices due to a data migration project.

Karen Thomson from the Institute of Payroll Professionals said that whilst the idea is good in principle, there are certain issues that need attention before the organisation would support the proposal.

One concern is that employers would be giving employees a payslip that does not tell them their take home pay. The chairman of BASDA’s payroll special interest group, Andrew Dove, said that this could have a negative impact on low paid employees and people who work fluctuating hours. Payroll software providers are also concerned that the new proposal will kill standalone payroll products. Although the payroll year end bottleneck would be eliminated with the new system, it would make more sense to process real time information through existing payroll software and the current government gateway, Dove added.

Tax specialists are agreed that further research and consultation is required before a new scheme is piloted. Baker Tilly’s tax director, Lesley Fidler, hopes the new initiative will be researched fully, piloted adequately and funded sufficiently before it is generally adopted.

At present the proposed reforms are at the discussion stage and suggestions from professional organisations will be taken into consideration before a formal consultation document is issued.

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