Radical change to the way employers and HMRC handle pay slip data is fast approaching – but could lead to “a perfect storm” for employers, according to tax experts.
The consultation on draft legislation for HMRC’s move to ‘real time’ information ended earlier this week.
From October 2013 all employers must use the new system, which will see pay slip data on tax, NIC and other deductions transmitted to HMRC at the time employees are paid, rather than once year.
P45s will become a thing of the past.
Real time information is fundamental to the introduction of Universal Tax Credits, also in October 2013, as part of the Government’s reform of the social security system.
The hope is that by providing the Department of Work and Pension with up-to-date accurate inform-ation about an individual’s earnings, the incidences of tax credits being overpaid and subsequently reclaimed will be dramatically reduced.
“Start planning well in advance of the mandatory deadline by allocating resource and budget against set milestones.
“There will certainly be an impact on HR and payroll systems which will be even more pronounced if these are in house or bespoke,” warned Teresa Payne, a partner at accountancy BDO.
John Harding, tax director at PwC, said: “Real-time information will see employers gathering and transmitting considerable volumes of data, beyond what is already on the payroll system.
“Timescales are incredibly tight for getting the processes in place across the many parties involved, let alone training and communications,” he said.