By Claire West

The Institute of Directors (IoD) today expresses deep concerns about the Government’s suggestion that employees’ pay might flow to a central HMRC computer. Sooner or later, the system would break down and some employees would not get paid.

The IoD’s views have been published in its response to the Government discussion document, Improving the operation of PAYE.

Key points:

•The IoD welcomes the initiative to improve the system, so that it gets to the right amount of tax more often and extra tax demands are not needed.

•There is a good case for using real-time information and for centralised computations of amounts due, although we must make sure that the net effect is to reduce burdens on employers, not increase them.

•But the suggestion that gross pay might flow to a central computer, which would then pass net pay on to employees, is completely unacceptable. Sooner or later, the system would break down and some people would not get paid. That would be a major embarrassment for HMRC, and a disaster for the employees affected and for their relationship with their employers.

Richard Baron, Head of Taxation at the IoD, said:
“This document contains a lot of good ideas. But the idea that HMRC should be trusted with the gross pay of employees is not one of them. The benefits of that proposal can be obtained by other means. We look forward to working with HMRC to devise proposals that will obtain the benefits, without the wholly unnecessary risk.”

To read the full IoD response to the Government’s discussion paper see: