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PAYE in the Spotlight

PAYE could be on course for significant change following the launch of a major consultation.

The consultation, announced by HM Revenue & Customs (HMRC) on 27 July, says that the business processes behind PAYE have remained unchanged since it was introduced in 1944.

The consultation is designed to explore whether there are alternative ways of collecting information that would reduce costs for employers and HMRC and to start a discussion about the collection of information on PAYE at the time employers pay individuals – known as Real Time Information – rather than once a year, and how this could simplify processes.

HMRC believes that Real Time Information would make it easier for people to pay the right tax after a change of job and possibly remove the need for the P45/P46 procedure. It could also offer the prospect of simplifying the PAYE end of year reconciliation process for employers, HMRC and individuals.

In the tax year 2009-2010, PAYE brought in £249 billion in tax and national insurance contributions and £1.1 billion in student loan repayments. It costs HMRC less than 1p for each pound of tax collected.

The consultation will run until 23 September 2010 and if responses are positive, it is likely that a second stage of consultation will begin in the autumn.

Links:  Consultation

For more information, contact Baines Jewitt on 01642 632032

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