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IPP survey results
We've seen some headline results from a survey the Institute of Payroll Professionals conducted, and they don't look too good for the Tory propsals. Out of 252 members who responded to the survey, 88% were against the idea 10% were unsure - leaving less than 2% in favour.
Another of the ideas put forward was monthly submission of returns rather than the annual process now in place. Responses were less certain here, with 43% against, 26% in favour and 32% unsure.
Rather than ripping up the existing PAYE system, IPP members suggested:
Investing in simplifications and improvements to the current systemDirect taxation of expenses and benefits via payrollCombining tax and NI into one deductionMore training for frontline HMRC staff.
IPP officials subsequently met with shadow business minister David Gauke to discuss the proposals and won assurances that payroll professionals would be consulted on any future changes.
What a joke
This is just the sort of kneejerk "roll back the frontiers of the state" approach which is making the Tories increasingly unelectable. No wonder Clegg is becoming so popular - look at the alternatives.
Proposals...
As per the IPP research there is much to recommend simplification that leads to accuracy.
Not sure that BACS processing time is the most appropriate or convenient time to calculate PAYE.
The small employers in my limited experience perform internet bank transfers, i.e. outside the BACS process.
If the Govt wants the cash sooner, then rein-in the payment-over date, i.e. instead of 19th of following month, say 5 days after payment to employee?.
This could be achieved if done hand-in-hand with the process becoming much, much simpler.
The large employer will not save much on software costs, most notably because they will still have HR systems, with "NET-to-GROSS" payroll (anticipating the amount of tax and re-imbursing the employee), salary sacrifice, flexible benefits and other finance relates items built-in or alongside.
Any party is welcome to talk to our professional bodies to canvass ideas. As long as I feel they then listen and adapt, then we have all learned from the process, and it's been worth-while.
Aghast
I am aghast at this insane idea. What if the money doesn't arrive in time. Osborne is showing himself to be even more of a total fool than I thought. I cannot believe people can even think of putting this man in charge of the treasury.
Of course the sensible approach is simplification
The sensible approach is of course to scrap PAYE and replace it with PAYG - which is the responsibility of the individual not the employer.
Then employers credit the gross to a bank account marked as taxable income and the banks automatically apply the percentage notified by HMRC's computers for the NI number associated with the account. That would work for all payments with HMRC responsible for tuning the percentage (and that's where the call centres would be).
Allowances, benefits and other wrinkles would be credited to bank accounts directly by HMRC - much like tax credits are now, but hopefully without the mountain of dead trees that accompany that system.
The existing PAYE system is complex, struggles with multiple jobs and is a relic of the cash era. It has turned into a huge job creation scheme on all sides of the fence - money that could be better spent doing something far more productive.
Privatising PAYE without simplification (particularly the elimination of NI as a separate tax) is just asking for problems.
Hardly suprising
Out of 252 members who responded to the survey, 88% were against the idea 10% were unsure - leaving less than 2% in favour.
Yes, and turkeys aren't too fond of Christmas either.
I'm pretty certain that if you went to employers and said 'just pay your employees the salary they are due gross, mark the payment as income and leave the rest to us' they'd sign up straight away.
PAYE is the accounting equivalent of digging holes and filling them back in again. It adds no value and can be done in a much simpler way.
Privatisation of PAYE
Am I alone in thinking the entire world has gone mad? First you almost completely ruin the Inland Revenue (as it then was) by heaping on it successively National Insurance and Tax Credits (various), then you merge it with Customs & Excise whilst at the same time reducing the number of significantly trained staff enormously and replacing them with call centre operators. You make it almost impossible for any member of the public (certainly living anywhere in the Greater London area) to be able to contact anyone actually responsible for dealing with their tax affairs let alone be in a position to rectify anything that is wrong. Now you propose to pass the administration of PAYE which (apart from the recent wrinkle with the bedding down of the new computer system hs worked very well in the past) into the private sector! Golly how I wish I could emigrate!
Brain Scan
Yet another example of why all politicans should be required to undergo an annual brain scan to confirm that there are are actually some "little grey cells" still there!
AEOs
As Simon states in his article, this may solve “the problem of those who won’t pay”, but what of those who won’t pay their other bills and are subject to AEOs? This is mentioned as an additional problem along with CIS, student loans etc, but since attachable earnings aren’t known until tax , NICs and pension contributions have been calculated the AEO deduction cannot be made. Also how will protected earnings be dealt with in respect of AEOs?
As mentioned by one of the other respondents, another ill thought-out idea. The big worry is that this (ill thought-out ideas, badly drafted legislation) appears to be more prevalent from all parties and does not bode well for the future whoever wins the election.
Banks and payroll
This is a silly idea, if ever I heard one! The Tories surely want to be taken seriously by voters, don't they?
I agree that even HMRC are thought more highly of the banks at present!
I think the banks have their hands on too much taxpayers' money, as it is, without our say.
If the idea is to protect tax revenues then I think it's a good
I'm going to go against the tide here.
I'm not sure what the exact idea is, but if the idea is that the gross leaves the employer's account and the net hits the employee's accounts and the tax HMRC's account simultaneously, with a 3rd party calculating the deductions. Then I think its a good idea.
Less admin for the employer; they only have to the calculate the gross.
No PAYE bad debts. I have seen far too many director's finance their businesses on tax debts. Presumably if bad debts are reduced the tax the rest of us pay will be reduced.
As I said I'm not sure if that is the idea, but if it is I then I think it the principal is a good one.
Bad Debt reduction
Do you honestly think that any bad debt reduction would be passed on to the tax payer by any Government?
Sorry that ain't gonna happen.
Privatising PAYE not good. Privatising HMRC, with accountability, now that is a different story and could well work using front line HMRC staff and Accountants to set it up.
Cleggy looks more and more like the next PM as time goes on. His secret weapon Vince could well make the difference come polling day.
Privatisation!?
So the Tories privatised everything when they were last in power, and what do they want to do if they get back in - privatise some more.
Is there nothing they won't privatise?
This sort of comment really underlines what many have suspected all along - the Tory's only want to get into power to line their, and their friends pockets
What'll be next, sale and leaseback of the houses of parliament?
Why not float the BoE on the stock exchange?
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It's all about footy
Maybe they want to get their hands on the PAYE from footballers' salaries, before the clubs go into administration and pay their fellow clubs and transfer agents preferentially to HMRC ...
if it ain't broke..
OK there are lots of things we would change about HMRC / tax administration etc, but this isn't one of them. As has been pointed out, recent issues with NPS will be ironed out soon, and I can see absolutely no benefit to anyone - the state, taxpayers, businesses of this barking idea. Surely someone at Conservative Central Office has talked to the payroll profession before coming up with this little nugget? (or should I have said "listended to"?)
The biggest issue in my view with PAYE is employers defaulting on payment, and the new penalties commencing now should make an impact on that. What HMRC needs is more bodies knocking on employers' doors on a daily basis asking where the money is. A significant investment in debt management "bodies" who don't sit on the phone making unpleasant phone calls, but actually get on their feet and go in search of money could transform collection - warnings about new penalties being issued at the same time. If every member of staff visitied 5 businesses three days a week business owners would soon learn how the world works.
Yes there is plenty of room for simplification, but while the likes of Portsmouth FC default on £17 million in tax (admittedly not all PAYE) this is where the effort is needed.
Turkey's voting for Xmas??
I've got a vested interest in the situation staying as it is. I'm an accountant in practice and charge for payroll services, so if the system changed I would be worse off..... or maybe I could spend the time providing 'added value services' instead!
If I look at it from a neutral point of view it makes sense to me. What's the point of Rebecca's suggested improved debt chasing procedures if that can be removed all together by collecting the PAYE at source. Is that not 'efficency savings'? If I told my clients in future they could just pay their staff the gross payment and let the bank worry about the rest, and even better they do not have to pay me for calculating PAYE, I'm sure they would see that as an improvement. Of course those who rely on PAYE for cashflow would not like it. But should businesses be financed by tax debts?
Of course the government would waste the savings on something else but that's another story.
Unpaid tax collectors
The reason why PAYE is not paid at source and has to be paid by 19th April by employers is to recompense being unpaid tax collectors.
If an employer cannot (not will not) pay (eg they haven't been paid) what is the point of adding ludicrous penalties which only exasperates the situation.
If an employer has enough money to pay net but not gross what do you think they will do if they have to notify banks (or anyone else come to that)????
The majority of employers pay their taxes, maybe a little late sometimes. Of course you will always get the rogues.
Again we have a situation where a sledge hammer is used to crack nut and the Tories wonder why they are not streets ahead in the polls
save money?
So the banks wil lbe doing this for free will they?
Or once they have their cartel set up, would the charges will go through the roof as with credit card interest rates (healthy competition - or a cartel gouging customers with no where else to go to?)
Is this real?
This story seems full of speculation and has no attribution. "... his boys have been going round explaining how they are going to take PAYE away from HMRC and give it to the banks ..." is as close as it gets to a source.
Is it real, or just a scare story?
Good career move ?
It’s quite likely that whoever wins on 6th May will be there short term because of the sheer scale of the country’s problems which are not much talked about in the election debates.
So Osborne might be thinking long term about his career prospects after a short spell in Government and what better employer than a bank with a new guaranteed income stream ? Who was it who said the little people pay taxes and the big people take the tax money?
PAYE & Gross Payments
Just a couple of thoughts.
If this plan went ahead, there would need to be a third database owned and operated by BACS / VocaLink, in order to determine what Tax was to be deducted - what PAYE Code Number to operate - and what NI to deduct. Not everyone pays the same percentage of NI and not everyone has the same PAYE tax free allowances.
The "third database" would have to take account of the fact that an Individual may well want his / her occupational pension paid into one bank account and their salary from an Employer paid into a different bank account.
The idea that there would be a real time correlation between the Payroll database, the BACS / VocaLink database and HMRC's New PAYE Service implies that a lot of folk would have to improve considerably and when one considers the problems that HMRC created when they merged their PAYE databases and issued millions of incorrect PAYE Coding notices, well, call me synical but .....
Oh and does anyone realy believe that the Payroll Software companies would be thrilled at the prospect of changing their software so that the gross to net calculation was not undertaken by the Employer? Would they be issueing updated software pakages to each and every existing Customer, at no cost?
I like this ideal,
One of the main problems with the tax system is that HMRC does not know about all of a person’s income until a long time after the person has been paid the money. Therefore the tax system is always trying to pay catch up (and predict the future) with tax codes etc – the benefit system gets even more problems with this.
If all my taxable income (including from the rental agent I use to rent out my house) was paid into the same current account, and marked as “taxable” on the BACS system, then the HMRC would have all the income numbers in real time. We would still need tax forms for expensive that can be offset against rent, but at least the problem will be solved for most tax payers. (Tax credits and other benefits could also make use of the same real-time data flow) Now if only I trusted anyone to be able to implement a new large computer system without problems! Getting from here to there will not be easy, but that does not mean we should not try. (Another option is for all employers etc to have to inform (online) HMRC about all payments each time a payment is made, and then HMRC could tell them how match tax to deduct taking into account the complete information about the persons income. )
Rental Income
As rental income is taxed seperately (there could be losses b/f from previous years etc. etc.) it couldn't work.
The Tories were only talking about PAYE anyway.
Why can't it work for Rental Income?
Most private rental income is var an agent, the agent already deducts there changes (and building maintenance costs) etc before paying the money over to the landlord.
Yes there will be other items (including interest on any loans) that need to be done by a tax form, so a tax form will still be needed, but as the landlord will get tax back when he complete his tax form, it is likely that his tax form will be completed quicker! As to past losses etc, HRMC already knows about these, there is no reason why the bank could not also tell HRMC about the interest they charge on all loans, so the landlord only has to tell HRMC about the loan when it is setup. Just because the current system works well for accountants, does not mean it can’t be change to work a lot better for everyone else!
Privatise PAYE
Over the last ten years we have seen every state asset sold off... gold... at the lowest possible price, electricity, water, nuclear power, Post Office, under way... all we have left is the Royal Family and the inland revenue to sell.. and the french have indicated that they wish to purchase the Royal Family, after accidently losing their own 200 years ago..The running of the tax system will probably be thrown in as a BOGOF loss leader..
Ashley Doggett FCA
Refunds
Why should you give HMRC money and then have to claim a refund due on rental income. Losses could accrue for many years depending on the property. Look at the problems with CIS and that doesn't even go through a third party.
The best thing to do is for HMRC to take all our money and just give us what it thinks we need to live on.
I wonder what bank the Tories were thinking of using - not one owned by the government (sorry us) surely.
How long before we all went back to using cash!!!!!!!!!
Privatising PAYE
Whilst I like the idea of not having to process payroll, and am all for simplifying the whole PAYE process, it's the idea that the banks are the ones to have the plum job that doesn't sit well.
One has to question whether the banks have sufficient controls and processes (and the current global financial mess might suggest otherwise) to be able to execute the job. Also, let us not forget that the banks were audited, but this in itself did not provide an adequate mechanism for revealing errors in accounting treatment. As for corporate governance within the banks, no amount of process produced the correct result in the end.
Does anyone else think that handing over to the banks the responsibility of collecting income taxes seems a bit like rewarding them for their mistakes?
Simplify the PAYE process, yes, possibly even privatise it. Give it to the banks, no thanks.
PAYE & Payroll - The Conservative Proposal
Just to clarify matters -
The current Conservative proposal to change the way in which PAYE is operated does not mean that Employers would avoid any Payroll duties. They would have to operate the calculation of the Gross Pay for each Employee, undertake payment of all Statutory payments and deductions. Having computed the gross payment to be made to the Employee, they would then be required to use the BACS / VocaLink system to make electronic payment to the Employees bank account.
The assumption has to be that everyone has accounts and connections to this system, and I would assume that there is no proposal to reimburse any costs which may arise from this requirement.
The input of the Gross pay by the Employer, into the BACS / VocaLink system would then trigger the deduction of Income Tax and National Insurance Contributions, allowing the Employees Net Pay to be deposited in their bank account.
Perhaps we all should be given the ability to see the demonstration model which HMRC has developed?
One further point, the PAYE tax free allowances of an Individual could be reduced to take account of any income that they were potentially receiving, thus assisting in HMRC obtaining Income Tax, In Year. Where this is not possible, the Self Assessment system would manage the payment of Tax.
Big government by proxy ?
I thought the Tories were against interventionist big government .... how does handing control of your bank account over to an agent of HMRC square with that philosophy ?
Reliance on HMRC Logic
Just discovered on HMRC website is the preposterous logic that some of the incorrect PAYE Notices of Coding which the New ( and expensive ) PAYE System issued, were caused, as HMRC views the situation, because -"the information submitted on form P14 (from the Employer or Agent) at the end of the year does not exactly match the information we hold on our main record. This may differ in respect of the works number or other details."
In orther words, the Employer or their Agent has had the temerity to send in a Form P14 which contained the details of Pay, Tax, NI and other details which were on the Payroll System, and since details other than Pay, Tax and NI did not match the information held on the HMRC PAYE system, clearly the Employer was indicating to HMRC that the Employee was employed twice. Well it is obvious, if the Works Number or Payroll reference did not match that held by HMRC, the Employer is at fault !!!!
What arrogant individual thought that the Payroll reference or Works Number held and use by an Employer was only changed when the Employee undertook another employment with the same Employer ???
Check out the following web page - http://www.hmrc.gov.uk/incometax/annual-coding-mismatch.htm
So we have HMRC who clearly
are unable to apply the simple logic that a Payroll reference or Works Number is a means by which an Employer tracks employees on their Payroll database and not an indication of the number of employments heldassume that an Individual is likely to have more than one employment with the same Employer
who are capable of commissioning a Laptop demonstration of how Bacs / VocaLink can take the gross payment from an Employer and ensure that the correct Income Tax and National Insurance Contribution is deducted from the payment ....
Are we not adults who no longer believe in the fantastical ?