OTS calls for review of PAYE system

In a new report, the Office of Tax Simplification (OTS) has called for the Pay as You Earn (PAYE) system to be reviewed, to ensure tax agents can ‘see relevant client information’ and ‘access a number of key services’.
The report suggested that tax agents ‘don’t always have full access to their clients’ PAYE records’. In addition, the current PAYE system ‘does not handle the fluidity of the modern workplace very well’, according to the OTS, especially in relation to changes of job mid-month or concurrent employment.
Furthermore, the OTS stated that information collected via Real Time Information (RTI) ‘doesn’t always flow through to personal tax accounts quickly’, which can result in ‘inaccurate calculations’. This leads to stress for taxpayers, incorrect tax codes and ‘a lack of faith’ in HMRC’s systems, the report said.
According to the OTS, system problems lead to ‘significant costs’ for businesses and HMRC itself. The OTS acknowledges that any changes to the current system would have upfront costs, but ‘should soon pay for itself’, and facilitate efficient tax collection, thereby helping to improve taxpayer experience.
Commenting on the matter, Bill Dodwell, Tax Director at the OTS, said: ‘It is time for a new review of PAYE, to look at areas where the inputs from employers do not work well and how they are processed by HMRC to update tax codes and the new personal tax accounts. The review needs to update PAYE for modern working patterns.’
The report also proposes creating a ‘PAYE-like experience’ for the self-employed, in order to allow them to set money aside to pay future tax liabilities.

Coutesy: Branston Adams