Concerns over Tory PAYE shake up

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The Institute of Payroll Professionals' Karen Thompson outlines the areas of uncertainty surrounding the Conservatives proposed changes to income tax.

The Conservative Party has released new proposals for a new automated bank-based system that would remove the responsibility of deducting and paying income tax from employers.

Under the proposed system, income tax and national insurance contributions would automatically be deducted from employees' gross pay, removing the need for employers to process different tax codes and pay income tax for employees. This means the responsibility for calculating NI and income tax contributions would fall to HMRC.

So what could this potentially mean?

  1. Employer submits gross pay information to HMRC via t...

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23rd Feb 2010 16:51

When I first heard about this

it was a real you cannot be serious moment. The above article is a very measured and sensible assessment of the proposal which personally I believe if implemented would be a nightmare at every level for every employer and employee in the country.

There is one line in the DT article which I think sums it all up - to the effect that employers will simply need to ensure the correct NI number is linked. Simple of course. I don't think so.

And it puts more onus on HMRC to do the sums and get it right. With presumably even fewer staff than at present if it is going to save money.

If PAYE is reallyl better off scrapped then why not have a straightforward withholding tax on salary of say 20% or 30% with everyone doing a tax return at the end of the year.




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By lenko
23rd Feb 2010 20:47

It'll Never Happen...

I almost hurt myself laughing when I read this in the Telegraph.  (This actually MAY be the Tories floating the idea, market-testing it).  Or some sort of pre-election gimmick.  Either way, it's never going to happen.

My first reading of it was that HMRC would send employees tax codes to the Banks, who would then take on the burden on computing tax and remitting it to HMRC.  What could possibly go wrong with that?

HMRC cannot cope with the work they have NOW, let alone with daft ideas coming from wee Georgie Osborne. I ran payrolls for years, and the one thing I always had in mind was that this was people's PAY. If I cocked up, there was no food on the table come Friday night, nothing to pay the rent from, no cash to pay for a pint.

Could we trust HMRC to think like that?  Or the Banks?


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By Anonymous
24th Feb 2010 08:37


Well put Lenko. couldn't agree more. small businesses would also suffer from the cashflow disadvantage of paying the gross amount over a week or so before payday, rather than the net to employees and the tax/NI a couple of weeks later.

How long would it be before HMRC couldn't cope and you had to submit wages 3 months in advance, what about weekly runs?

Its a non-starter

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24th Feb 2010 10:50


And you'd trust the banks to run this ?

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By lenko
24th Feb 2010 14:39

Trial Run?

Thanks -- always nice when someone agrees with me... doesn't happen often.

I think that a limited trial run should be made for... let's say ... a year or so, using a small, tightly knit workforce of -- oh I dunno -- 650 people in the Commons and haven't-a-clue-how-many in the Lords. 

Let the buggers -- sorry -- let these gentlemen work out all the bugs, before they apply it to the rest of us.


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By Anonymous
24th Feb 2010 15:42

Proposal for PAYE




The PAYE system has only three basic components, the Employee, the Employer and HMRC.

The information required is similarly basic, the identity of the Employee, the identity of the Employer and the income and net tax free income the Employee is entitled to in law.

The fact that HMRC appear to be unable to process information from Employers coupled with what appears to be a fixation with ensuring that PAYE and National Insurance deductions are swiftly deposited into Treasury accounts is without doubt the underlying cause of any problems that arise.

Who says HMRC are unable to process information supplied to them? Well no less a person than Leslie Strathie, the Chief Executive and Permanent Secretary to HMRC. She points out in the HMRC 2008/2009 Accounts that there are 116 million - 116,000,000 - individual amounts of National Insurance Contributions which have not been allocated to the account of the Individual who actually had the payment deducted from their wage or salary.

The Accounts also reveal that HMRC have problems in reviewing the liability to Income Tax of several million ordinary PAYE Taxpayers, presumably because the Employment HMRC assume the Individual is employed at is not the employment at which they are actually working.

If HMRC can not effectively process details of income received and tax and National Insurance paid, there would seem little hope of any new system improving matters.

There is also the small matter of the job losses, which will have to occur in order to achieve the £5.5 billion savings to Business which the Conservative Treasury team are expecting to be made.

Can we not get some one who understands what PAYE is actually about to deal with the problem, rather than those who have had, no doubt, glittering careers in other industries or keen IT technicians who are centred on flogging the latest super fast way to make a complete mess of things

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By 0098087
26th Feb 2010 09:39

This is why

We need to keep Osborne away from the Treasury and really the Tories from government. 

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By Anonymous
26th Feb 2010 11:36

I agree

with lenko, they must be mad to think they could sort this out themselves.  Then again, i suppose they all made such a good job of their expenses claims perhaps they should be in charge of this as well.........hmmmm, just seen pinky and perky whizz by my second floor window.........

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28th Feb 2010 12:50


"... ensuring that PAYE and National Insurance deductions are swiftly deposited into Treasury accounts" - except for Football clubs, of course.

Incidentally I thought the Tories were against "big government" ...?

Passing calculations and debiting powers (and control of cashflow detail) from business to HMRC seems to be a move in the opposite direction.

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03rd Mar 2010 11:38

Screaming Nonsense

If anyone senior in the Tory party thinks this is a good idea then the Tories have lost their way even more seriously than I thought.

As numerous others have pointed out calculating normal PAYE and NI is not difficult.  The real difficulties and expense and complication lie outside that, in the area of data collection, statutory absence calculations, holiday pay accruals, back payments, pension calculations, attachments of earnings orders, and so on ad nauseam. The idea that this would be better handled by some central "one-size-fits-all" system administered by HMRC and the banks is so risible that I would be laughing if I weren't crying at how stupid the Tories are making themselves look with this.

The current problem and expense of being an employer isn't caused by private companies offering payroll software products and services mostly at incredibly modest cost. The problem is caused by the ludicrous complexity of all the government regulation that surrounds payroll, and insourcing processing would actually make that problem worse not better, because it would remove easy access to the data from employers.

But furthermore, even if the State Payroll Calculation System were technically a plausible way forward (which it is a million miles from being) the entire concept of heading in that direction is still a betrayal of the one of the core values of conservatism, keeping the role of the state as small as possible.  This would be one of the largest IT projects ever in the world. Certainly the largest ever in the UK, dwarfing the NHS records system into insignificance. Is this kind of grandiose government project really the kind of thing that the Tories see as the solution to the ills of the nation? I'm very sad and concerned if it is.


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