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Improving the operation of PAYE - REC response

Improving the operation of PAYE - REC response

The REC has responded to the HMRC discussion paper on improving the operation of Pay as You Earn (PAYE). The discussion paper laid out plans streamline the PAYE process, to limit instances of incorrect tax deductions and to reduce administrative costs for both businesses and the government.

Specific suggestions include the migration of all employee tax details into one centralised account and the introduction of Real Time Information - whereby employers submit details of any tax deductions made to an employee's gross pay (e.g. income tax and NICs deductions), at each payment to that employee rather than as an annual update.

The third stage would be the introduction of centralised deductions whereby employers would submit the gross payment to a 'central calculator' within HRMC through the electronic payment system. Deductions would then be calculated by HMRC and made automatically with the resulting net payment sent to the employees bank account.

Commenting on the REC's response, Chris Richards, Policy Advisor at the REC said:

"The discussion paper included some valid suggestions on how to improve the speed and accuracy of the PAYE system. As ever, the devil is in the detail and we will need to weigh the practical implications of the option put forward.

The feedback from recruiters is that any reduction in bureaucracy would be a welcomed. However, the public sector does not have a great track record with large scale IT projects which is why each phase would nee to be properly evaluated and spread over realistic timescales.

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