PAYROLL INSIGHT
HMRC hints at addressing PAYE failings
Mike Nicholas selects key excerpts from recent oral evidence which suggest payroll professionals and the industry face imminent radical change
O n 5 September, the Public Accounts Committee took oral evidence from HM Revenue and Customs (HMRC) on its overall performance in the past year, and what it is doing to best serve its customers – UK taxpayers – whilst delivering complex change. Jon Thompson, chief executive and permanent secretary, HMRC, answered a wide range of questions relating to error and fraud in tax credits and also revealed plans to address failings of employers, pension providers, payroll bureaux and intermediaries. Edited selected excerpts from the full account of Jon’s answers, which can be found here: https://bit.ly/2DQ95Zr, are given below. Why is error and fraud in tax credits not reducing? The tax credits benefit itself is systemically flawed, in that it is an annual benefit cycle. There are too many dynamics in the benefit itself … and that level of complexity is inherently open to quite significant fraud and error. That is why 19% of cases actually have a fraud or error.
For the income element, every employer puts their real time information [RTI] in. Why has that not smoothed this over and seen that percentage of error and fraud go down? One issue that we continue to focus on – in relation to closing the tax gap, actually – is the role of intermediaries, and particularly employers and pension fund providers. It is increasingly our view that the standard of administration of pay as you earn (PAYE) is not good enough and is significantly variable. ...administration of pay as you earn (PAYE) is not good enough and is significantly variable For some employers – we have drawn up a list of particular kinds of employers – the nature of employment and the hours are quite fluid. They are then not administering PAYE to the standard that we think they should be.
That then flows into RTI, and then into this. That raises some other questions about what that means for universal credit. There is already a significant feature of the tax system, which is, what is the role of intermediaries? But we are discovering, through a more analytical approach to it, that the standards are very variable. You can draw up a list of where we think, ‘You are all really good at it, but you others are not’, and therefore we can make some sort of intervention. So, have you got a sin list then? Will that ever be public? Yes. I doubt it would be public. I can tell you that we have gone chief executive to chief executive with a couple of organisations, and said, “Look, you have this responsibility to your own employees.” Yes, we had some concerns about some public sector employers and we would treat them exactly the same as private sector employers. It is large workforces where there is movement in and out of that workforce, which leads to some poorer administration of PAYE than for a more stable workforce.
| Professional in Payroll, Pensions and Reward | November 2018 | Issue 45 22
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