PAYE – consultation re Real Time processing
HMRC are consulting on the collection of Real Time information to potentially improve the operation of Pay As You Earn.
The consultation document provides further information on HMRC’s plans to collect PAYE information in ‘real time’ and follows the publication of a discussion paper on improving the way PAYE works that was released by HMRC last summer.
Currently the major updates to the PAYE system take place when annual employer returns are submitted. HMRC’s plan is to move to a system where employers send HMRC information about tax and other deductions from employees’ pay when the employee is paid, rather than only at the end of the year as at present.
HRMC plan to begin pilot tests of the new system from April 2012 with the aim that all employees will be submitting real time information by October 2013. This timetable is considered to be ambitious by many in the payroll industry.
HMRC have highlighted the following benefits to collecting real time information:
- Annual employer returns will be phased out, reducing costs for HMRC and employers.
- HMRC will use the real time information to update records when a taxpayer changes employer removing the need for employers to separately send forms P45 or P46.
- HMRC will have the real time information needed to support the Government’s welfare reform agenda.
- HMRC will be able to help prevent and detect errors and fraud within the welfare and PAYE systems.
- HMRC will not need to wait until year end to identify underpayments by employers and collect those debts.
- In some circumstances, HMRC will be able to adjust employees’ tax codes in year to reflect their changing income and therefore, over time, reduce the need to send employees repayments or bills after the end of the year.
Interested parties with comments on the consultation paper are invited to send comments to HMRC by 28 February 2011.