By Claire West
The Policy & Research team at the Institute of Payroll Professionals (IPP) has submitted a formal response to the Government’s proposals to improve the PAYE system based on feedback from a survey to its membership. The main conclusions to come out of the survey reveal that members support real time data/information but oppose centralised deductions.
In summary, the Institute’s collective recommendations, on behalf of its members, to HM Revenue & Customs (HMRC) are as follows:
* A full consultation process to commence as soon as possible on the data requirements, rules and regulations surrounding real-time data;
* Revisit and look to include benefits in kind as part of real-time data via the payrolling concept;
* Abandon centralised deductions work and permit real-time data to bed in for at least five years before considering any other options if this does not succeed in reducing the incorrect tax position with acceptable tolerance levels.
Nearly 300 members responded to the IPP Consultation for the ‘Improving the Operation of the PAYE Proposals Discussion Document’ (from now referred to as the PAYE Discussion document). The key findings are:
* More than three quarters (76.4%) of IPP members do NOT find it difficult or time-consuming when considering the operation of the PAYE tax code (disregarding the recent HMRC system problems). 3.5% of members said they do find it difficult and time-consuming while 22% said they sometimes do.
* The PAYE Discussion document states that HMRC would utilise the current BACs system for the transmission of data. More than a third (34.5%) of IPP members feels that this would add additional burden and or costs to their organisation. 65.5% said no, they already use BACs.
* With the operation of a real-time system, there may be scope in the future to abolish the P45/P46 process. More than two-thirds (67.1%) of IPP members welcome this move. A third (32.9%) does not.
* The PAYE Discussion document also asks how benefits in kind might be simplified. More than two-thirds (68.5%) said it could be simplified by implementing “payrolling” and nearly half (47%) said by simplifying the benefits legislation. Furthermore, more than one in six (14.3%) prefer to keep the P11D process.
* The PAYE Discussion paper suggests that a centralised deduction process would save UK employers £500m in costs. More than two-thirds (69.3%) do NOT support this statement when using an estimate of their current costs. 5.4% of IPP members support this statement and a quarter (25.3%) said maybe.
* Three-quarters (74.9%) of IPP members would NOT support a proposal to introduce centralised deductions. 6.6% would support a proposal and 18.6% said maybe.
* Many payroll professionals have stated that the cost of administrating the PAYE system is not calculating tax and NI but determining what is taxable and NI-able. More than two-thirds (70.7%) of IPP members support his statement. 12.6% do not and 16.8% said maybe.
* More than half of IPP members (52.1%) do NOT think their payroll timetable would be reduced in order to meet the contractual payday for employees if the banking system were to calculate tax and NIC based on a submission of a payment file. Nearly a third (29.9%) thinks it would be reduced and 18.0% said maybe.
* The PAYE Discussion document suggests that most employees do not refer to their payslip in respect of net pay, but their bank account instead. Due to the nature of the discussion document, it is likely that the tax and NICs deductions would not be shown on the payslip. An overwhelming majority (96.4%) of IPP members do NOT support the theory that employers would see a reduction in enquiries if employees were to refer to their bank account for net pay rather than their payslip, while only 3.6% support this theory.
* Referring to section 6 of the PAYE Discussion document, more than two-fifths (42.9%) of IPP members do NOT believe that data would be secure, while 20.9% think it would be secure and 36.8% said maybe.
Karen Thomson, Associate Director of Policy, Research, and Strategic Visibility at the IPP, said: “Based on the survey results from the IPP membership, there appears to be an appetite for real-time data. There is division over whether real-time information should be used via the BACs system or via HMRC’s channels. And although the majority would seem to prefer HMRC channels, there are calls for a more robust system that does not take more than six weeks to transmit end-of-year data.
“It is also very apparent from the feedback that employers do not want to lose the ability to provide employees with a full gross to net payslip and therefore any movement forward on centralised deductions would need to take this into account. It is also clear that IPP members find centralised deductions a step too far with the costs and envisaged loss of customer service an unacceptable price to pay.
“Discussions with HMRC have shown that it does understand many of the employer concerns outside of normal payroll operations, but far more work would need to be carried out to convince employers that this is the right way to proceed.”
To read the IPP’s full formal response and to view the survey results, click here.
The IPP conducted the ‘Improving the Operation of PAYE’ survey from 2 August — 17 September 2010 and received 264 responses from its members.