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HMRC launches second consultation on improving PAYE

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The overwhelming majority of the responses to a recent consultation favoured improving the operation of the Pay as you Earn system by collecting ‘real time information’ (RTI), HMRC said as it launched a second consultation and set out a timetable for employers to move on to RTI, beginning in Spring 2012.

Employers will send information to HMRC about tax and other deductions from employees’ pay ‘when, or before, they make the salary or wage payment to the employee, rather than sending returns at the end of the year’.

HMRC invited comments by 28 February 2011 from ‘all who have an interest in or use the PAYE system’. The second consultation paper sets out how the business processes behind PAYE, which have remained largely unchanged since its introduction in 1944, will be changed to ‘reduce administration costs and improve the accuracy of PAYE’.

HMRC will hold seminars and workshops with representatives of employers, payroll bureaux and software developers during the consultation period, and a final specification for payroll software developers will be published by the end of March 2011.

HMRC said: ‘The Government will publish its formal response to the consultation, including full details of how RTI will be implemented, in Spring 2011. Further consultation will accompany the publication of draft amendments to the PAYE regulations which should follow in Autumn 2011.’

It confirmed that RTI is ‘a key component’ in plans for a Universal Credit from 2013.

‘The Department of Work and Pensions (DWP) will use RTI to award and adjust Universal Credit to take account of employment and pension income,’ HMRC said.

‘To support DWP’s plans, RTI will be introduced from Spring 2012. Employers will be moved on to RTI on a scheme-by-scheme basis over the following 18 months, starting with a small group of volunteer employers to test the new system.

‘The migration will be carefully managed, starting with large employers in 2012/13, followed by smaller ones in 2013/14 with ex-patriate schemes and the smallest employers being the last to be brought into RTI. All employers are expected to be part of the new system by October 2013.’