July 29, 2010
HM Revenue amp; Customs (HMRC) is calling on millions of taxpayers to help adjust current Pay As You Earn (PAYE) regulations and improve the tax system’s efficiency.
Following the launch of discussion document Improving the Operation of Pay As You Earn, and the government’s new Office for Tax Simplification, announced earlier this month, that HMRC is particularly looking at how more frequent “real-time” PAYE information could support the tax and welfare system.
Speaking this week, HMRC Exchequer Secretary, the Right Hon David Gauke MP, said: "The launch of the Office for Tax Simplification marks a very important step towards making the tax system work better. But simplification mustn't stop there.
“The PAYE system needs to respond better to the circumstances of the individual taxpayer because only in this way will we be able to reduce errors and provide taxpayers with the clearest picture possible of their tax and allowances. We also need a PAYE system that reduces the burden on employers.
"We would like to hear from all who have views on how a real-time system could best meet their needs to ensure that we deliver a 21st century PAYE system."
The HMRC claims that more up-to-the-minute PAYE information would implement a string of changes, including:
- Making it easier to ensure individuals pay the right tax after a change of job while possiblyremoving the need for the P45/P46 procedure;
- The prospect of simplifying the PAYE end of year reconciliation process for employers and HMRC;
- Allowing income related benefits and welfare payments to better reflect the current circumstances of the individual; and
- Removing much of the uncertainty that leads to errors in the Tax Credits system.
Introduced in 1944, PAYE costs employers £0.7billion and the HMRC £1billion in administration every year. Applied to sick pay, maternity pay, directors’ fees and pensions (excluding state pensions), as well as wages and salaries, the PAYE system typically results in the correct amount of tax being paid on all of a taxpayer’s income.
With changes imminent, those struggling to understand the current PAYE system and any future amendments have been urged to seek advice as soon as possible.
