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Should online accountants be worried about PAYE reform?

Should online accountants be worried about PAYE reform?

Last Thursday, the REC responded to HMRC’s discussion paper on plans for streamlining the PAYE processes.

The Revenue wants to reduce the cost of administering PAYE for businesses and the government and at the same time reduce the number of incorrect tax deductions.

The main suggestion under consideration is to migrate employee tax details to a centralised account and introduce Real Time Information so that employers can submit income tax and NICs deduction details each time an employee is paid.

Eventually HMRC would like to introduce centralised deductions. Employers would use an electronic payment system to submit gross pay to the Revenue. They would calculate the deductions and automatically credit the employee’s bank account with the resulting net pay.

REC Policy Advisor, Chris Richards, said that recruiters would welcome any reduction in bureaucracy but warned that the public sector has had problems with large scale IT projects in the past and so each stage would need proper evaluation and implementation spread over realistic timescales.

Another change that is being questioned by the FCSA involves the abolition of year-end tax adjustments. HMRC has said they favour a system whereby information is updated when somebody changes employment.

However, the FCSA says that implementing and maintaining such a system might be extremely costly. It is also concerned that the storage of all the additional information might leave the Revenue open to a data security breach.

Matthew Sinclair from the Taxpayers’ Alliance is horrified by the idea of a centralised deductions scheme. He points out that people wouldn’t get a payslip and would need to check online to see how much tax they had paid. However, he thinks many people wouldn’t actually check and more mistakes would go undetected.

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Image: Pandora’s Box by Mycael

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