Delay to RTI Unlikely Despite Recommendation of All-Party Parliamentary Taxation Group, Says KPMG
“The chance of a delay to the introduction Real Time Information reporting (‘RTI’) for PAYE is slim to non-existent…despite the all-party parliamentary taxation group recommending postponing it to 2015,” says KPMG director.
Steve Wade made his comment in light of the white paper from the All-Party Parliamentary Taxation Group (APPTG), “PAYE at the Crossroads” which recommends a delay to the implementation of real time information reporting for PAYE.
The report looks into the forthcoming introduction of real time information (RTI) and its link with Universal Credits. IT also discusses the future for PAYE in the 21st century.
The APPTG lays out a new model for PAYE – Centralised Deductions. Under Centralised Deductions, employers would pay their employees in gross and have the PAYE calculation performed by a centralised calculator within the payments system. HMRC formally introduced Centralised Deductions into the public arena in July 2010. It can remove all of PAYE’s negative dimensions.
The report states the tight timescale for introducing a major change to the way PAYE is reported has been driven by the policy deadline for Universal Credits rather than business needs, adding that if HM Revenue & Customs (HMRC) were to delay the migration of RTI until mid 2015, the effect on Universal Credits would not be substantial.
HMRC introduced Centralised Deductions along with another proposal – RTI. Under RTI, employers will submit payroll data to HMRC via their payroll software at-or-before the point they pay an employee. Currently, HMRC are piloting RTI in preparation for a mass migration in April 2013 to facilitate the introduction of Universal Credit with real time earnings information.
The APPTG supports the concept of RTI – integrating PAYE reporting with payroll – having proposed it back in March 2010.
However, the APPTG is concerned by the policy-driven timetable through which RTI will be delivered and the affect this may have on business. Our stakeholder research indicates that HMRC may have underestimated the investment cost of RTI, as well as the migration cost and administrative burden for business. RTI in and of itself still has a business, albeit a weaker one than HMRC estimate.
Wade said: “The last thing businesses should do is assume that they will get more time and thus put their planning on hold. Our understanding is that HMRC remains determined to introduce RTI in April 2013 as originally planned.
“Under RTI, employers will need to report details of payments to staff to the tax authorities as and when they are made. This is the biggest change to the PAYE system since it was introduced in 1944 and will represent a significant payroll challenge to many employers. Fortunately there is a pilot underway and we believe that the majority of larger businesses have started to plan for RTI. Starting to plan is not always the same as taking concrete steps towards implementation however and most businesses have a way to go in order to be prepared for RTI’s introduction.”
This report asserts that the modernisation of PAYE is at the Crossroads. In its effort to bring PAYE into the 21st Century, HMRC is currently investing in a legacy IT system due for retirement in April 2016. We do not view the Interim Solution as sustainable, because the at-or-before principle is not
enshrined. As such, the Government has two paths.
It can progress towards our vision for the wholesale removal of PAYE’s negative dimensions and the next generation of policy delivery in Centralised Deductions, through implementing the Strategic Solution, which in and of itself has several major benefits for government and citizens. Or on the other hand, the Government can move backwards and seek to consolidate PAYE by removing several of the administrative requirements by scaling back to a version of periodic filing.
Through RTI and its facilitation of Universal Credit, it is evident that PAYE is a cross-governmental issue. In order to achieve the PAYE model that can deliver effective and efficient policy, the appropriate governance structures must be place. A single government department should not be expected to consider the cross-governmental implications of its strategy and to this end, the most important recommendation of this report is for the Cabinet Office to establish a working group, endorsed by HMRC, to fully explore the benefits of the Strategic Solution and Centralised Deductions across all of government.
‘PAYE at the Crossroads’ is the third report in a series on the operation of PAYE. It is the results of months of stakeholder research across government, business and professional bodies.
The PAYE system was introduced in 1944 and its fundamental operation has not changed to this day.