HMRC is suggesting that it should act as a payroll bureau for the entire UK workforce. Instead of employers paying their own workers, HMRC would collect gross pay from employers, make calculations, and pay workers their net pay. Deductions for tax would be kept by HMRC.

 According to giant, who provide PAYE umbrella and outsourced payroll services to the recruitment sector, the existing PAYE system is prone to errors with increasing numbers of workers paying the wrong amount of tax. Workers who change jobs on a regular basis (e.g. temps and contractors) are more likely to end up on the wrong tax code and paying too much/little tax.

 HMRC collected £238 million too much tax as a result of PAYE errors in 2009/10, up from £96 million in 2008/09 (an increase of 148%). HMRC collected £132 million too little tax from other taxpayers in 2009/10, compared to £114 million the previous year (an increase of 16%).

 Matthew Brown, Managing Director of giant, comments: “The PAYE system is prone to errors. The proposal that a centralised computer should be responsible for the entireUK workforce is a chilling prospect when you look at HMRC’s track record in this area.”

 “The PAYE system was designed for a time when people changed jobs far less frequently than they do now. An error by a centralised computer could leave millions of workers unpaid or taxed the wrong amount. Temporary workers, because of the frequency with which they change jobs, could be particularly vulnerable.”

 “Private sector payroll systems, like giant precision’s outsourced payroll solution, are very reliable and have the advantage of being decentralised. An error by a centralised payroll system, such as that which HMRC is proposing, could affect the majority of the UK workforce.”

He adds: “If HMRC assumed responsibility for payroll, employers and recruiters could experience huge problems.”

Source Recruitment International