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PAYE pooling could create ‘bigger targets’

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27th Oct 2011
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A proposal by HMRC to allow “connected” employers to pool PAYE returns for employees may help some but create “bigger targets” for the taxman, Baker Tilly has warned.

Many organisations, such as corporate groups of companies, professional partnerships, charities and public bodies, are made up of a number of separate entities. All entities within the organisation that are employers will have their own PAYE reference and are required to make payments and returns to HMRC to meet their PAYE obligations.

This can be “unwelcome administrative burden”, which could be eased by allowing connected to be treated as a single entity for PAYE purposes, HMRC said in a consultation.

Under PAYE pooling, three companies within a corporate group could set up a single PAYE reference in the name of their parent company, allowing the three employers to make combined payments and joint returns to HMRC.

Pooled payroll could reduce employers’ administrative costs but could also potentially creating larger targets for compliance visits by tax officials, which could mean higher penalties for employers yield higher penalties, Baker Tilly said.

Martin Benson, partner at Baker Tilly’s employer consulting group, said: “If HMRC reviews an employer’s records and finds that five employees have claimed reimbursement for their travel between home and work, the larger the payroll in question, the larger will be HMRC’s assumed total for the whole workforce in calculating the arrears of tax, interest and penalties.

“If several employers are pooled together, HMRC will base their estimate on the total number of employees, instead of just those employed by one of the pool members.”

The pooling proposal is the latest plan to reform the PAYE system, which was introduced in 1944 to cope with an increase in the number of taxpayers during the World War Two. An HMRC discussion paper published last year proposed the provision of “real time” payroll information and centralised collection of tax and NIC.

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By TAXACCOLEGA
28th Oct 2011 13:13

According to Taxaccolega Chartered Management Accountants, it will be difficult to manage the poole and will result more penalties to be faced by the Employer and there is no guarantee if really administrative cost will go down.

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Replying to Flying Scotsman:
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By chatman
31st Oct 2011 13:52

According to me, this is a strange thing to say.

TAXACCOLEGA wrote:
According to Taxaccolega

Isn't this stating the obvious, as you made the comment?

According to Chatman, it is.

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