Instead of employers deducting income tax then paying gross salaries to employees, the gross monthly payment would go to an HMRC-run tax “calculator”, which would then pass the net salary to the worker.
The reform would mean the end of traditional monthly payslips, because employers would no longer be able to tell workers how much tax they had paid each month.
To make PAYE more accurate, Treasury ministers have suggested that employers should provide HMRC with monthly updates on workers’ salary payments and other financial details.
Such “real time information” could then be used as the basis of a new “centralised deductions” system that would give HMRC an unprecedented role in workers’ monthly salary payments.
Under the centralised deductions system, employers would pay workers’ monthly salary into a central calculator run by HMRC.
There, income tax deductions would be made automatically and the net salary then passed on to the worker by HMRC.
Instead of a payslip detailing pay and deductions, workers would only find out how much income tax they had paid by asking HMRC.
All wages in the country will be paid to the government and then we get to have whatever it is that government thinks we should be allowed?
For fuck\’s sake, not even the Soviets went that far.
Leave aside the practical difficulties: HMRC to calculate and distribute paycheques to 25 million households, on time each week/fortnight? With the correct hours, overtime, allowances, deductions and tax and NI?
Please, don\’t make me laugh.
Concentrate instead upon the moral logic of this. All of our money isn\’t really our money. It\’s the State\’s, all must be reliant upon that beneficient State for every penny of whatever dribble of income they might allow us.
Err, no. \”Treasury ministers\” who are advocating this can fuck off and die: and the Coalition they rode in on.
Even the discussion of this nationalisation of every wage and salary packet in the country is worthy of a revolution: and I\’m sure I won\’t be alone in revolting if anyone ever tries to put it into practice.
Fortunately Whitehall and Horse Guards Road contain plenty of sturdy lamp posts. I\’ll bring the hempen.
Update: Mr E has a proper tax system to suggest:
Every year, I propose that each taxpayer receive an itemised statement from HMRC, providing a detailed breakdown of how every penny of your taxes has been spent – £431.20 on the NHS, £193.31 on the police, 59p subsidising MPs\’ booze, 2p on duck houses, etc. etc. – and countersigned, for good measure, by your local MP. Is it value for money? Does it reflect my priorities to some minimal degree? Am I happy with the political representative that nodded it through? If so, then I may – generously, if through gritted teeth – cut you a cheque; and yes, you can just fucking wait three days for the money to clear like the rest of us, you fucking bastards.
That is, we should have something more like the Hong Kong tax system. I\’m sure it\’ll be a great shock to everybody to know that a tax system which requires you to actually write out a cheque for all you owe to the government has low tax rates.
Yeah, I agree. If they want to have the central calculator, then fair enough – I’m happy to have HMRC calculate my monthly taxes, and then tell my employer how much to send them. But I can’t think of a single good reason for the money to actually be funnelled through them.
But I’d bet that UNITE and other civil service unions would be positively creaming their Y-fronts at the thought of the power this would put into their hands… The ability to withhold the pay of the entire working population by “downing tools” at the computer centres.
“Err, no. “Treasury ministers” who are advocating this can fuck off and die: and the Coalition they rode in on.”
The ‘treasury ministers’ are merely suggesting what their department has come up with. It is a grossly offensive idea but one the Government started suggesting a few years ago. No doubt there would be some juicy contracts for a bank or two to do the back office processing.
Had I some faith in Parliament I would be content that the Ministers are doing their job of representing their department (rather than originating these ideas) so that other MPs can hold the department to account. If they have their heads screwed on they would debate away this idea as immoral and impractical.
I do not have that faith.
I expect the payroll processing industry will be opposed to this.
There’s another factor: slipping on the PAYE payments to El Revenue from time to time is a classic cash management technique that has kept many a small business alive these past couple of years.
“The ability to withhold the pay of the entire working population by “downing tools” at the computer centres.”
I think you should highlight this. That’ll kill the proposals stone dead.
A cruel irony is that the latest revelations of snafus in the PAYE system could be used as justification for an HMRC-run payroll system, when it is actually the most obvious (practical) reason why they should keep the hell away from the idea.
Kay Tie has hit one major nail.
Another is that the HMRC will then have a record of every bank account.
They then can demand the right to withdraw from that account any accidental “underpayment”. This will almost certainly form part of the plan.
Once that happens, then we open the door for any other barking mad hatstand carpet munching levy, tax, clawback, tariff, charge, fine, penalty, “green” rent seeking to be taken at will and with no protection.
Cattle, meet shed.
I doubt that this will stand, but if it did then I think they might recoil from the results. Years ago, I had a random demand from the taxman for £2,000. I looked through my tax records, code, etc., took them to the local tax office and between us, the outcome became clear; they owed me £7,000.
‘Exploding cigar’ is the phrase which springs to mind…
I don’t have the links to hand but this sounds like a completely screwed up report by the DT.
The HMRC discussion document has been around for some time and as far as I recall it is all about real-time updating of employees’ circumstances so that codes and deductions are always up to date.
There was nothing about HMRC taking over the calculation/deduction/payment process in that document.
This looks like a crock of shit report.
Found the link.
From the document:
Responsibility for the calculation of the amounts of tax, NIC and student loan repayments and their deduction would remain with employers.
I can’t really believe this is serious. Leaving aside the fact that it is not possible for HMRC to do this, it does not address the problem.
The problem is not that payroll agencies and employers are so cretinous as to be unable to crunch the numbers, rather it is that HMRC routinely give such folk totally spurious tax codes which are the basis for calculating the correct tax.
So, even if HMRC could do what no other entity in the known universe can do – be a payroll agency for 25 million employees – people would still have their tax wrongly calculated.
Still, the Telegraph has become the broadsheet equivalent of The Sport, but without those handy telephone numbers, (Take note Wayne!), so this article is probably a crock of shit anyway.
“That is, we should have something more like the Hong Kong tax system”
I did point this out to Mr. Murphy but I am told “this idea is so ludicrous it is farcical”. Of course, perhaps it’s just that a bin man/nurse/teacher/any employee being asked for their tax in one lump at the end of the year might ask what they get for their money rather than it being taken before they see it.
Previously you were able to pay your tax by credit card, fantastic for earning airline miles!
GeoffH – if you’d actually read that document properly, you’d have discovered chapter 5. I suggest you read it.
The key bit is section 5.6:
“Today, the majority of employer payrolls are connected to the electronic payment infrastructure. Under Centralised Deductions the employer would send the gross payment through the electronic payment system to a central calculator where the deductions calculated by HMRC would be made automatically. The resulting net payment would then be sent to the individual’s bank account and the deductions would be paid directly to the Government.”
Is this related to this proposal which for some reason you seemed to like (https://www.timworstall.com/2010/02/20/oh-very-cute-very-cute-indeed/)
Tim adds: Looks like it and boy was I wrong first time around.
So, nobody told the idiots who proposed this idea that Labour did NOT win the last election?
Oh my God.
There is great confusion at the moment around the meaning of section 5.6. Originally many people (including many tax experts and the press and myself) understood that it meant employers would pay Gross Salaries to HMRC; who would then deign to pass on Net Salary to employees. As every right thinking person can see, it would be an unparalleled disaster.
However, it now appears that it might just be incompetent/irresponsible/unclear wording by the document’s authors, and that only gross salary INFORMATION would be passed to HMRC; and employers would continue to make payments of net salary to their employees. I have tried to confirm this by phoning the enquiry number in the document – but had to leave a voicemail and still await their reply.
If it is just information about Gross Salaries that is sent, then it will still, of course, be a disaster, but at least HMRC won’t be holding onto the wages of the entire nation.
Don’t agree with most government polices but this makes sense? It would save employers money on accountants since then they wouldn’t have to pay one and wouldn’t make a jot of difference to the employee, in fact HMRC could pay employees who haven’t earned enough in the year their tax back automatically?
Seems to me nobody loses here except accountants?
Unless you are doing something dodgy with your employees pay which wouldn’t work with this method?
Nope, can’t see any problem with this one, for a change.
Make that wouldn’t have to pay one to do PAYE.
Don’t be silly, HMRC can’t hold onto the wages of the entire nations, there isn’t much I can think of that would propel the gelded sheep of England into civil disorder but that would do it.