My thanks to a loyal reader who has pointed me to the plans by HMRC to implement a "real time" PAYE system which, "theoretically", will ensure that when/if the Department of Work and Pensions (DWP) introduce a Universal Credit system the DWP will have up-to-date information on everyone's income.
So far so good.
In order to aid HMRC introduce the system we, the taxpayers, have given HMRC £100M.
I am sure that Ex Com and the relevant IT managers are fully capable of not wasting this money, and of introducing a system that will not go over budget and will work as expected.
Anyhoo, HMRC have issued a Consultation Document, responses to which have to be lodged by 28th February 2011.
One of the core changes which HMRC propose to make is to utilise the BACS system for reporting PAYE information. Currently payrolls can use either the internet or Electronic Data Transfer. These electronic channels were imposed on employers when HMRC introduced compulsory electronic filing of PAYE data.
However, HMRC now state that the change to BACS is necessary because:
"EDI does not link the payment instructions and information about deductions which is fundamental to the RTI (real time information) concept."
The BACS system (run by Vocalink) handles practically every financial transaction, debit card, credit card and inter bank funding transfer in the UK.
Now what does that tell you?
Think about it....
Yes, that's right, it has saturated the UK market and probably has little growth potential in the UK unless it finds a new market.
Vocalink is the main provider of payment services to the UK public sector. They handle 98% of state benefits and 95% of all salaries.
Thankfully for BACS, HMRC stepped in when they did!
By the way, in addition to providing BACS with a new market and imposing costs on many companies by making them change to BACS, HMRC are also demanding details of employees bank accounts.
Why does it need this information?
Quite unnecessary, unless HMRC has a legitimate reason to believe that fraud has occurred.
- HMRC intend to force payroll operators to switch their electronic communications capability to the BACS system, regardless of cost.
- HMRC intend to force every commercial payroll software developer to change the way in which his or her software operates, in order to comply with this chang.
- HMRC do not appear to have any procedure in place to compensate either payroll departments or payroll software providers for this change. Everyone just has to do it.
- HMRC have been given £100M of our money to pay for any changes to their computer systems.
- HMRC will, if this change goes ahead, have access to the bank account details of every employee in the UK. This is not in any way relevant to the correct calculation of Income Tax.
- BACS will gain a huge new market. It would also be interesting to know the terms of the contract with HMRC, wrt fees for data volume etc.
Tax does have to be taxing.
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