Real time PAYE system on the horizon

HM Revenue and Customs (HMRC) has confirmed that it will be going ahead with a major reform of the PAYE system. The overhaul will involve a switch to a real time information system. The new system will mean that employers must supply HMRC with details, such as income tax, national insurance contributions and student loan payments, on each payroll day rather than at the end of the year.

HMRC said that the change would bring several benefits. It will be easier to ensure that employees pay the right tax after a change of job and, in time, it will remove the need for the P45/P46 process. And there will be a simplification of the PAYE end of year reconciliation process for employers.

HMRC is to embark on a pilot scheme in April 2012, involving volunteer employers and software developers. Once the pilot scheme has been successfully completed, the plan is that employers will be expected to start using the real time information system from April 2013. It is due to become mandatory by October 2013.

While our lead article heralds, on the one hand the Government’s commitment to reduce compliance roadblocks, it seems that on the other hand they are being increased with filing requirements that only serve to make the administration of PAYE even more onerous.

Please don’t forget that we are here to help your business handle the demands of managing your payroll. Outsourcing the work could play a major part in freeing up resources that may be better devoted to expanding your enterprise.