PAYE pooling could lead to greater penalties October 2011
Posted date: 25 October 2011
The decision from HM Revenue & Customs (HMRC) to allow connected companies to pool their Pay As You Earn (PAYE) functions could mean larger targets for compliance visits and, in turn, lead to greater penalties.
According to Baker Tilly, the possibility of heavier fines is just one of the risks businesses face. Another issue is the potential for wider geographic separation of operations from payroll, which could hamper the flow of information and therefore increase the potential for compliance failures.
George Bull, Senior Tax Partner at the firm, commented: “While we welcome any change that will reduce the tax burden on employers, HMRC has a duty to organise these changes in a way which recognises the colossal demands being placed on employers.”
There are also concerns about the expense of implementing the systems and other changes necessary with such as sizeable project. These could prove a hindrance for HMRC, particularly at a time when other significant payroll systems developments are imminent.
Employers are already having to cope with auto-enrolment, Real-Time Information, new tax/ National Insurance contribution (NIC) charges under “disguised remuneration”, and now PAYE pooling. Therefore, many employers may limit themselves to just the legal minimum requirement.
Bull added: “If HMRC wishes to achieve the maximum benefit from all these innovations, then it should implement a single, coordinated programme of changes instead of what looks increasingly like a series of experiments in which employers are the unfortunate guinea pigs.”
However, there is the possibility that employers who choose to pool their payroll function as a single point of contact for PAYE and NIC payments will benefit from duplicated cost savings
and economies of scale. These funds could be used for better resources to ensure more consistent compliance.
and economies of scale. These funds could be used for better resources to ensure more consistent compliance.
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- October 2011
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