Employment Tax Expert

HMRC’s discussion paper on PAYE that has just been issued outlined the most significant reform proposals for the PAYE system since it was introduced 66 years ago.

The new proposals comprise two main elements – the provision of ‘real time’ payroll information and centralised collection of tax and NIC.

Under the new system, information on PAYE deductions would be collected at the time employers pay individuals (real time information), using the BACS system. Responsibility for the calculation of the amounts of tax, NIC and student loan repayments and their deduction would remain with employers.

With real time information, employers paying electronically would send HMRC details of an employee’s pay; the deductions of tax, NIC and student loan repayments; together with information about the payee’s identity. This would be for all employees, including those from whose wages the employer is not required to deduct any tax, NIC etc.

The information would be produced automatically by the computerised payroll system when raising the payment and would be sent to HMRC via the BACS electronic payments system as part of the payment instructions but the reality of such proposals have been called into question. This employment tax expert whole heartily agrees with Karen Thomson, associate director of policy, research and strategic visibility at the IPP who has stated that “Whilst many support the idea of real time data, there are a lot of operational issues that need to be sorted out.

“The big issue here of course is central collection. The IPP has huge concerns about this and at this moment in time would not support it. The discussion document suggests that the employer, via the banking system would work out the gross pay and inform HMRC what statutory payments to deduct and so on. The banks would then (via BACS) calculate what tax and NICs are due. They would then notify the employer what is taxable and what NIC-able. All of this means that employers would be issuing a payslip which outlines the gross pay but not the net pay.

“The other issue is that government departments are having to reduce their spending by up to 25%. At the moment, employers field a lot of PAYE enquiries from employees. If HMRC is responsible for calculating tax and NICs, they will be the ones employees turn to with questions – and they’re over-stretched when it comes to answering queries as it is.”

It really doesn’t take brain of Britain to work out that giving HMRC at the current time more responsibility for answering tax payers queries is a seriously bad idea – how many of these people “dreaming up” such proposals have tried to contact HMRC via the normal channels?

Anyone who has a debt with HMRC, whether it be from a Tax Investigation, employer compliance review, employment status review, PAYE/NIC/CIS or Self Assessment you need to take heed of what is happening regarding HMRC debt collection agents.

To begin with, those out in the field are now not allowed to contact HMRC offices to validate the debts that they are being asked to collect. Why you may ask, well there are two very different reasons:
1.The support teams back at base do not have the time to take phone calls – this is the official explanation; or 2. That HMRC is preparing the ground for this work to be given to private debt collection agencies (The Budget announced that a further £500m of debt will be handed over to private agencies). These private agencies, will obviously not be able to phone up HMRC offices and ask for details from confidential records.

HMRC have conducted a bizarre pilot scheme to test whether going down the route of private debt collection agencies would work. Think really bizarre and then carry on reading …

The agencies were given a tranche of work to do, and a control tranche was left with HMRC teams (but was left completely untouched).

and the result, that’s right, the debt collection agencies won!

Fast forward to reality and it will be no surprise that over half of the debts that HMRC debt collectors are given to chase up are in fact incorrect but rather than the onus being on HMRC to prove the debt, these collectors are told that if they are challenged by a “customer” the onus is on the “customer” to prove that HMRC are wrong, which is morally wrong and goes against our judicial system of innocent until proven guilty. So imagine what it’s going to be like with private agencies

Whether you call them:
employer compliance reviews
PAYE investigations
Tax investigations
Compliance audits

Be warned – they are on the increase – not surprising really what with the increase in powers HMRC have had since 1 April – but why now ?

Well it’s quite simple 6 July represents the due date for forms P11D (the annual return of expenses and benefits) and together with other PAYE NI returns HMRC have theoretically got all the details they need to start reviewing each companies compliance procedures and that is what they are doing.

Don’t ever assume a simple letter from HMRC is just that, it never is. Now more than ever you need to take expert advice and your accountant although excellent at corporation tax and doing your accounts is NOT an employment tax expert. This is what we do at EICG we have the experience of being ex Inland Revenue which will save you time and money so check us out at www.eicg.co.uk/hmrc-compliance

After they’ve been caught quite frankly taking the piss out of the Great British tax payer you would think that MPs would keep their heads below the parapit for some time at least but no!
Why keep quiet when you can SPIN ’til your hearts content this is the only explanation for David Cameron’s statement that Tory MPs who are making further repayments of expenses were not doing it because they were guilty or had breached the rules – pleeeeeeease!!!

We now seem to be borne out of a culture that is border line TEFLON (non stick if you’re feeling a bit slow). Proof if you want/need it – Cameron goes on to say:
“This is not about MPs who have broken the rules. We all know the rules weren’t good enough” – so now it’s not the MPs who thought they could get away with enhancing their remuneration package with creative expense claims – no these poor soles were forced to claim for a Duck Hotel and the like because the rules weren’t good enough – it’s quite frankly pathetic and what is needed is a proper independent review of these expenses not a cosy internal arrangment – get EICG in there and we will put them through what all other companies and their employees have to go through when they have a tax investigation or HMRC enquiry into their PAYE NI compliance procedures. Don’t be fooled by the spin – tackle your own MP about their expenses, after all YOU are paying them!

I don’t think I can pick up a paper these days without seeing another article about expense payments and whether they are bona fide. The latest if you haven’t caught it relates to the Directors of Liverpool Football club, claiming millions relating to travel, and legal expenses. This is on top of MPs claiming for accountancy fees – where is it going to end you may ask? Well companies are sitting up and taking note. At EICG we have had a number of companies contacting us regarding carrying out a compliance audit where we look at expenses, benefits, PAYE NI etc. This then enables them with our help to have proper compliance procedures in place. This serves a number of purposes whether it be to ensure that their procedures are up to date, that employees and directors are not claiming what they shouldn’t or just as important these days to avoid an Inland Revenue investigation or HMRC enquiry.

So, can you put your hand on your heart and say that you are fully aware of what is going on in your company – if not and to be honest how could you then your not alone so get in contact with us at EICG