Member Article

Businesses must prepare for radical PAYE overhaul

The consultation on the current PAYE system ended today, in a move which will radically change the way employers and HRMC handle payslip data.

As of October 2013, all employees must use the new system which will see all payslip deductions transmitted to HRMC when employees are paid, rather than once a year.

It is hoped that the changes will drastically simplify the 1940s PAYE model, and by removing P45s and other such complicated forms. the Department of Work and Pensions will be able to prevent incidences of tax credits being over paid and subsequently reclaimed.

The change to Real Time Information is fundamental to the introduction of Universal tax credits.

Commenting on the changes, Susan Blair senior manager at PwC in the North East said: “The modernisation of PAYE is long overdue. The system dates back to the end of the second world war when most people had one job, often for life, and were paid in cash.

“ Given complex working patterns today it’s surprising it’s coped as well as it has.“

Although PwC are welcoming the changes, which will help in the long term to prevent tax code errors which adversely affect many employees, there are still some concerns that the tight timescale could cause problems for employers. Susan believes that this could mean we are “heading for a perfect storm”.

She continued: Information will see employers gathering and transmitting considerable volumes of data, beyond what is already on the payroll system.

“ Timescales are incredibly tight for getting the processes in place across the many parties involved, let alone training and communications.“

The introduction of the automatic pension enrolment scheme at the same time will most likely cause further problems, especially as there is no leeway on timing with the launch of Universal Credits.

This was posted in Bdaily's Members' News section by Ruth Mitchell .