Author: Yvette Lamidey
Published in: Payroll Prof.
Date: August 2006
Taxation: Legislation
The New Taxes Management Act
Payroll departments usually concentrate on the legislation that regulates how people are paid. However, the new Taxes Management Act cuts across the administration for all taxes, including PAYE, and so it is pertinent that payroll representatives took part in the consultation on the new act.
Our work is regulated by a wide range of primary and secondary legislation some of which has greater impact and or significance than others. Some of which makes sense, even if we don't like it's impact on our work and our business, and there are some pieces of legislation which are just plain nonsensical and difficult to implement and comply with as well as being difficult to police.
So we were very pleased to be invited to attend a series of workshops in early spring to help develop the New Management Act (NMA) integrating the administrative legislation for the main taxes following the creation of HM Revenue and Customs. These workshops were run in an open and collaborative manner and deliberately didn't present ideas for consultation but asked a series of questions about the topic for each workshop and allowed open and in depth discussion. We invited members to participate in the workshops as well as the P&R Team and had a great deal to add to the discussions in respect of PAYE in all its glory. Many thanks to the members that took time out from their busy work schedules to attend the consultation meetings on our behalf.
The five core schemes being reviewed are:
- Value Added Tax
- Income Tax Self Assessment (ITSA)
- Corporation Tax Self Assessment (CTSA)
- PAYE and NICs as operated by employers (i.e. Class 1)
- NICs paid by the self employed (Class 2 and 4)
These Schemes cover 11m customers of HMRC, half of whom have income from businesses and have the greatest overlap for organisations/entities since many have to deal with HMRC for 2 or 3 of the schemes and will have encountered differences and inconsistencies in their administration. Hence, focusing on these specific schemes is more likely to deliver tangible and quantifiable benefits to employers, agents, businesses and tax payers/citizens.
The aim of the project is to create a modern, simpler and more consistent legislative framework for the administration of taxes which is easier for employers, agents and ultimately tax payers to understand and comply with and easier for HMRC to operate. In so doing will remove unnecessary complexity and reduce the compliance burden on taxpayers and agents.
The NMA will include all provisions relating to the rights and obligations of taxpayers and HMRC; provisions governing the way tax and charged and collected, the way claims are made and paid; and provisions relating to sanctions and appeals.
It doesn't include the government of the amount of any liability or claim.
The NMA Team are also working closely with the Powers Review and Whole Customer View teams. The Powers Review is different in so much as it is looking at HMRC's powers and the safeguards for taxpayers whereas the NMA is to do with the mechanics pf the tax system needed to assess and collect tax. And the Whole Customer View team are looking at how HMRC delivers services and processes to customers and there will be some overlap in areas such as registration (PAYE, VAT, with Companies House, for CT etc).
There isn't an intention to force the Schemes into one single administration scheme if it is not sensible to do so as the schemes are still inherently separate and distinct on a number of levels. The intention is that as the project develops to look closely at what works and what doesn't and where the greatest benefits would be.
It is not expected that the new Act will become law before the 2007/8 parliamentary session and this will allow consultation on the proposed legislation as it is drafted.
The workshops covered:
- Registration and notification
- Returns and self assessments
- Payments and repayments
- Assessments, claims and time limits
During each of the workshops representatives were asked to identify what currently works well and what doesn't, whether there was any scope for closer and alignment and consistency between the Schemes and what benefits this would deliver, plus where closer alignment wouldn't be welcome and why. The representatives were split into small groups to allow freer discussion and the top issues were brought to plenary sessions for further discussion.
The NMA team are reviewing the information that was gathered at the workshops, specifically those areas that were identified as in need of improvement and are developing the legislative framework. Some of the existing law will be modernised and some will be improved or changed. Draft clauses and explanatory material will be published in tranches during 2006 giving representative bodies, including the IPPM, time to review and consult with their members and respond to the proposals.
Returns and Self Assessments
It was quickly identified that the number of returns and their deadlines create undue burdens on employers. Many of the forms were seen as obsolete and that information could be provided more easily through mainstream returns or rolled up into one form. This was particularly highlighted in respect of multiple employments, students and absences from the UK .
Coding errors and delays inaccuracies in issuing codes impacting on both payroll processing and end of year underpayments.
There was overwhelming agreement that the new Act should be fit for purpose and reflect the reality of the process as well as the needs of HMRC and should have discretion that would allow a light touch and to ensure that customers are aware of their rights as well as their obligations.
Payment and Repayment
Different definitions and their usage across the Schemes cause real problems and there should be alignment in terminology as much as possible.
It was also suggested that where payment dates fall on a non banking day the date should be moved forward to the next banking day and not backwards as now. Many employers and individuals get caught by this even though they had every intention of paying on time.
The annual earnings period for directors was a particular bug bear and representatives advocated that it should be abolished and that HMRC should review the position for new directors. Anomalies re NICs on directors' bonuses were also discussed.
It was also suggested that there should be consistent statutory rules for record keeping across the Schemes and the records to be kept should be prescribed and that HMRC should take into account the irrecoverable cost of providing information.
Some of the suggestions made, and bug bears identified, where outwith the NMA but these have been documented and passed on to the appropriate team. These included:
- non compliance - the framework for enquiries or penalties which is being addressed through the Review of Powers, policy simplification beyond administration (a lot of suggestions were not unsurprisingly made under this heading)
- specific forms and procedures
- poor administration of existing law including inconsistent or incomplete advice.
None of these were a great surprise to the representatives but at times the strength of our feelings and the extent of impact was stronger and greater than some of the HMRC people had realised, especially those who had a Customs and Excise background and were relatively new to CTSA, ITSA, PAYE and NICs.
A full summary of the NMA workshops can be found at http://www.hmrc.gov.uk/nma/workshops-summary.pdf
Yvette Lamidey
Yvette Lamidey is director of Paris and Parks Consulting
www.parisandparks.com