Doubts raised over future of new PAYE system

A drastic change to HMRC's PAYE system, which will provide real-time information on employees, needs to be sufficiently funded and adequately piloted if it is to be successful in the coming years, said a Baker Tilly tax director.

HMRC opened a consultation on a computerised tax account for every employee with the aim that the software will be up and running in the lifetime of the current government.

However, tax director at Baker Tilly, Lesley Fidler, warned HMRC there is a " long way to go" before the software can be implemented.

"While it is important that there be aspirational goals for our tax system, HMRC does not have a strong record of implementing IT projects," she said.

She gave the example of recent efforts to merge the previously separate computerised National Insurance and PAYE systems, which was plagued by " difficulties".

Fidler added: "Anyone who was involved with the short-lived attempt at paying tax credits via the payroll will hope that this fresh initiative will be fully researched, adequately piloted and sufficiently funded before it goes live."

Currently both employers and pension providers make tax and national insurance payments for employees to HMRC and report them to the tax office once a year. Annually reporting those figures can result in under- and over- payments of tax, the Financial Times reports.

The latest consultation is proposing each employee be given a single computerised tax account which brings together their employment and NI records, giving HMRC real time information of all payments made.

According to the consultation document, proposed changes would also remove the need for employers or employees to fill in forms to obtain the right tax code, and could simplify the process when a person changes jobs.

HMRC has already invested in the software to create the accounts.

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