The future of PAYE: How the 66-year-old tax system is changing

The future of PAYE: How the 66-year-old tax system is changing

Summary: Real-time information could spell the end of troublesome year-end tax reckonings

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...yet to be finalised as the consultation process is ongoing - there is a February 2011 deadline for industry responses to HMRC's consultation document. In the meantime, CFOs and finance directors should keep a watching brief on PAYE developments, industry experts advise, and ensure they fully engage with the consultation process.

"Be vigilant and keep up to date on news," Elaine Gibson, senior policy officer and manager of postgraduate qualifications at the Institute of Payroll Professionals (IPP), said. "It's such a major change that [finance chiefs] need to have read and digested things like the [consultation document] so they at least know what the key points are... so they understand why government are saying and proposing what they are, and they're able to respond accordingly."

Talk to your payroll provider
According to HMRC's consultation, the change to RTI will require payroll programs to be updated by rewriting the parts of the software that submit payment instructions in order to implement a common standard for the exchange of information. CFOs should therefore ensure their payroll software provider is aware of the looming change and has an update schedule in place.

"[CFOs] really need to keep an eye on it - take an enlightened interest," says John Whiting, tax policy director at the Chartered Institute of Taxation (CIOT). "Their reaction may be 'all we need to do is just leave it and our payroll software suppliers will sort it'. Yes but, either themselves or through the various industry bodies, they need to make sure their views are heard and concerns are expressed."

Filing cabinet: PAYE remains a paper process at heart - HMRC's plan to introduce real-time information will change that

PAYE remains a paper process at heart - HMRC's plan to introduce real-time information is set to change that
(Photo credit: mrmanc via Flickr.com under the following Creative Commons licence)

Norman Green, chair of the British Computer Society's payroll group, also recommends that finance chiefs should ensure their department checks the organisation's payroll software provider is keeping abreast of developments and will be able to rise to the upgrade challenge - as "any reputable payroll software will".

Organisations using their own in-house software for running payroll should take an even closer interest in PAYE developments, he added, as they will be responsible for making the updates themselves.

Finance departments will also have to review their payroll processes to fit the new system, according to HMRC, but should only need to spend a small amount of extra time dealing with the additional reporting.

"For RTI to work, employers will need to...

Topic: Tech Industry

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