Conservative controversy.........

[Gouldie0]

It appears the Conservatives have plans to radically change the PAYE system, now although this is in the early stages as there contacting software companies my question is.

Would you trust the Conservatives to get this right? Would you trust the banks to get this right and ensure your employee's are paid correctly?

Tories plan biggest shake up of income tax system since Second World War - Telegraph

Let me know your thoughts.

Kind Regards

Neil

 

[laserads.co.uk]

As a general idea it sounds fine , its not a hard calculation for a computer ! but im sure the actualprocess will be full of holes , and i would not have any issues trusting banks to do process .... seesm a fine idea just a shame its a tory one !

PAUL

 

[Gouldie0]

As a general idea it sounds fine , its not a hard calculation for a computer !

That's the thing Paul, the calculation is actually the easy bit, it's all the administrative bumff in the process that's the problem.

This has been looked at before by the current government, i just don't see why they can't simplify the administrative process or even remove NI contributions completely.

Out of interest, have you ever completed payroll for any employee's? I think if you had, you'd understand why this idea has generally been greeted with dismay.

Kind Regards

Neil

 

[Mike Lewis]

As I understand it, this proposal does not do away with PAYE. It doesn't even relieve the employer from the responsibility of calculating PAYE. What it does do is to remove the collection of the tax from the employer, and place it on the banking system.

The idea certainlty has merit, but there are easier ways of simplifying the system without such a radical change as the one proposed.

As you suggeested, Neil, the obvious change that's crying out to be done is to do away with NIC contributions. It's nonsense to have two parallel forms of income tax. If NIC was merged with PAYE, it would cut a swathe through the administrative burden both on employers and HMRC.

But I suppose the problem is a political one. It would mean that the headline rate of tax would jump overnight by about 30 percent, so most people would wrongly assume that their tax has gone up by some huge amount. It would be hard for any government to sell that.

As for whether I would "trust the conservatives" with the proposal, I don't think it makes any difference which political party originates the policy. Whether it succeeds or not depends on the skills of the project managers and others responsible for implementing it.

Mike

 

[Former Member 1]

The short answer on this one is that I wouldn't trust the banks in the least. In the past few years particularly Bankers as a community proven themselves to be all of dishonest, incomptetent, direputable, greedy and essentially parasitic in nature.

They are, in my estimation, pretty much the lowest of the low and need chained to the floor, not given yet another opportunity to abuse the public..

Politicians concerned about 'selling' the abolition of N.I. to the public need only tell them of the simple plain truth about it. Abolition might actually reduce the overall tax burden to the individual so they see a rise where it matters most... On that last line of the payslip!

Frankly all I get from this proposed scheme is the stench of well-rotted damp rodent...

 

[Gouldie0]

As I understand it, this proposal does not do away with PAYE. It doesn't even relieve the employer from the responsibility of calculating PAYE. What it does do is to remove the collection of the tax from the employer, and place it on the banking system.

Mike

Hi Mike,

Can you tell me where you have read that the employer still has the responsibility of calculating the PAYE?

From reading the above link / article, it doesn't mention this only that it will:

The Conservatives are working on a pilot for a new automated bank-based system that would remove the responsibility of deducting and paying income tax from employers. The new system could save businesses up to £5.5bn according to the Tories and increase revenues to the Exchequer of £1bn., according to the Tories election hopefuls.

Rather than leaving employers to process different tax codes and pay income tax for employees, the new system would automatically deduct income tax and national insurance contributions directly from an employee's gross pay as it is paid into their bank account.

So in effect, would this just remove the process of paying a cheque to HMRC on a monthly basis and instead paying gross wages through to the employee's bank account for tax and NI to be deducted? I think this is asking a lot of the banks to get right and could you imagine if you had a query or if something had been processed incorrectly. You'd either have to wait for hours on the HMRC helpline or spend a rather large amount of time on an automated line to a bank employee (Now would this require that bank employee's to be trained on PAYE principles should they receive any questions?).

Would this in effect create a more efficient process? I don't think it will, however i do think there should changes such as i said previously like the abolition of NI deductions.

This all sounds very confusing .............. and the reason i say this is because, at present the employer will use an automated system (sometimes free) that will identify the amount of tax and NI to be deducted and they then pay this to HMRC via cheque or D/debit. Any amendments that need to be made, i.e. SSP, SMP, change in tax codes or student loan deductions can easily be adjusted by the employer or payroll administrator.

That would then be detailed on the end of year returns ready for submission to HMRC.

I guess it's a case of let's see what happens.................

 

[Mike Lewis]

Neil,

You asked:

Can you tell me where you have read that the employer still has the responsibility of calculating the PAYE?

Yes, I can.

It wasn't in the Daily Telegraph article that you cited, which was a rather simplistic summary of the original proposals. There was a much more detailed analysis given in an interview with David Gauke, on Money Box in Radio 4 a few weeks ago. He made the point that the proposals were concerned exclusively with the collection of the tax, not the calculation. (In fact, there's nothing in the Telegraph article that says otherwise, as far as I can see. The article says that the system would "remove the responsibility of deducting and paying income tax from employers" (my italics),it does not menton calculation.)

Gauke also stressed that the proposals were at a very early stage, and he hadn't yet done any serious consultation with employers, accountants, HMRC, etc. It was just an idea they are floating, not a a definite proposal for the "biggest shake up of income tax system since Second World War", as the article stated.

Mike

 

[Adventurelife]

This is just one part of the overall burden that small businesses face that drains the life out of them and the willingness of the owners or directors to carry on.

For any small business to be 100% legal in all it does is a massive task that results in huge amounts of non productive work, the type of work that creates wealth, growth and jobs. Owners of businesses go into business to do just that not spend all their time on outdated state driven systems.

I am all for change and change in a big way not just small scale ideas like this that will probably never ever come to anything.

The whole tax/vat/paye system needs a radical overhaul and with the technology we have today it can be done. Can be and will be are different things though.

If the tax system was simplified in a huge way by getting ride of all the claim for this claim for that etc and just have a increasing flat % based on gross earnings you could get everyone to pay their own tax and paye.

We are now at a stage in the tax system where professionals who have spent all their working life dealing with it do not understand it all. Tax accountants are now just dealing with niches in the tax system as the overall tax system is to complicated.

Several years ago when I was looking for an accountant who understood the TOMS vat system I interviewed 5 all of which knew less than me and I am a donkey with accounting.

So to get back to the OP point I think it is great if this could happen, however, will it ? doubt it and if it did execution will be everything and governments are not good at making things work that involve large IT programs

 

[Scottish Business Owner]

I agree with the others. The whole system needs to be overhauled. This suggestion by the tories sounds ok in principle but I think it would take a great deal of time to get banks up to speed with how the deductions work etc.

This is probably more to do with freeing up revenue employees to deal with more serious cases. I wont be holding my breath to see this suggestion implemented and if the tories do win then we can look forward to another political party blaming the previous administration for messing everything up for the next few years.

Maybe this is an area where Scotland needs to look at whether this is something where devolved powers could be extended to. I thnk you have a better chance of something like that succeeding on a slightly smaller scale.

 

[DickW]

Payments will be instantaneous. Refunds will take for ever.

No I certainly wouldn't trust the banks to get this right and actually I don't want them dealing with my tax affairs.