Member Article

Tax report sets vision for future of PAYE

The All Party Parliamentary Group on Taxation has published its PAYE at the Crossroads report, analysing current problems with the system.

The report sets out a long-term vision for a new model of PAYE, informed by extensive stakeholder research.

It supports a model of Centralised Deductions, previously proposed by HMRC in July 2010, where employers would pay their employees in gross and the tax calculation would be made by a centralised calculator within the payments infrastructure.

The employees would receive their net wage directly to their bank account, and tax would then be transferred automatically to HMRC.

Centralised Deductions would also revolutionise the way that citizens interact with the state, as you would login to a self-service account to view tax contributions to the state in real time.

The Government could then build on this feature to show a breakdown of tax contributions to each department or even policy area.

Ian Liddell-Grainger, Chairman of the APPTG said: “The APPTG has been making the case for a fundamental root-and-branch reform of the PAYE system since our establishment in 2006.

“Today, we lay out a vision which HMRC themselves laid out two years ago and one we believe is the best idea on the table.

“At the heart of our vision is government transparency and citizenship. Universal Credit makes it abundantly clear that PAYE is no longer just an HMRC issue, it’s a cross-governmental issue.

“Every government department could potentially deliver policy more effectively and efficiently if the reform we are suggesting today is pursed. This is why we have suggested the Cabinet Office continue our research and fully assess the cross-governmental business case.”

Jamie Black, Head of Research at the APPTG added: “HMRC was heading in the right direction with its initial plan to use the payments infrastructure for RTI, but has gone slightly off-course in order to facilitate Universal Credit by October 2013.

“At this point in time, the key for PAYE reform is use of the payments infrastructure and
thus, HMRC should seek to deliver RTI through the Strategic Solution as soon as feasibly possible.

“The Strategic Solution will ensure that the flow of information to HMRC is truly in real
time and accurate, because the information will be attached to the payment. The Interim Solution is inferior because it separates the payment from payroll information only to check them against each other at a later date.”

HMRC are currently implementing the PAYE ‘Real Time Information’ (RTI) reporting, where employers will automatically submit payroll data to HMRC via payroll software in real time.

This was posted in Bdaily's Members' News section by Tom Keighley .