By Claire West

In response to the Government consultation document, Improving the operation of PAYE: Collecting Real Time Information, the Institute of Directors (IoD) said:

We are very pleased that the Government is limiting its attention to real-time information for the moment. But we are still concerned that centralised deduction remains on the table as an option for the future, even in the apparently harmless form in which it is presented here (it looked a lot more fearsome in the July 2010 consultation document).

Centralised deduction would pass over, from the employer to someone else, the responsibility to work out how much tax to deduct from pay and to take that amount off gross pay. That would blur the lines of responsibility. Employees would hold their employers responsible for any mistakes, even though the employers had not made the computations. It would therefore be a great way to damage workplace relations.

It is likewise vital to ensure that employers always have the option of controlling payments to HMRC. This is one of the options presented by HMRC, but payments under HMRC’s control are also mentioned. It must never become compulsory to give HMRC control.

We are pleased that the Government only wants employers to submit, in real time, information that is already collected. But we must be very wary of the suggestion that information which is currently collected for purposes other than PAYE might be needed. That will require the reconfiguration of employers’ systems, to feed the information into the payroll process. It may also require whole new data collection exercises. To take one example from Annex B, hours worked (item 44) just is not monitored, with any degree of precision, for many employees, and does not need to be monitored because they are clearly paid above the minimum wage.

Richard Baron, Head of Taxation at the Institute of Directors, said:

“Overall, this is a sensible document. We support real-time information, which has the potential to reduce bureaucracy and to facilitate reform of the benefits system. But we must be very careful about the details. There is always a danger that extra burdens will be imposed on employers for the convenience of officials. They will think, let’s collect some extra data (like hours worked) while we’re at it, so we can monitor everything more closely. And we repeat our call to reject the very foolish option of centralised deduction.”

To see the Government’s consultation document, Improving the operation of PAYE: Collecting Real Time Information, click www.hmrc.gov.uk/news/improve-paye.htm