UK PAYE system Overhaul Could Cause Problems for Businesses

hmrc PAYE OverhaulThe news that HMRC are overhauling the PAYE system has been greeted with some scepticism by Tax experts PwC. They claim that this could cause problems for businesses as they try to adapt to multiple changes at once.

From October, 2013 all employers must use the new system, which will mean that payslip data on tax, National Insurance contributions (NICs) and other deductions will be transmitted to HMRC at the time employees are paid, rather than once a year. P45s, the forms on which the information is currently supplied, and many other such forms will therefore become a thing of the past.

The government is also in the process of overhauling the social security system. It is to introduce universal tax credits in October, 2013, and hopes that, by providing the Department of Work and Pensions with up-to-date accurate information about an individual’s earnings, it will be able to reduce error in the payment of benefits.
John Harding from PwC 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.”
“But we could well be heading for a perfect storm given the scale and timing for change. Real Time 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. All this will be happening when many employers will be grappling with the challenges automatic pension scheme enrolment presents. Yet the launch of Universal Credits means there’s no leeway on timing.”
“There is likely to be a level of confusion among employees as they get used to the new system. However, few are likely to be sorry to say goodbye to the dreaded P45.”

If you have questions about how these changes could affect your payroll function and how we can help you ensure that you aren’t caught out by the changes then please call us on 01405 765782 or contact us via our contact form.

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