Susan's Legal Bits

In October 2010 Susan was interested in...

...how the HMRC paye review may effect umbrella companies

Hello all,

So this month the big hoo-hah has been the announcement in the national press about HMRC and the estimated 1.5 million of us that might receive a P800 (tax notice) stating that we owe the revenue more money. At the same time (perhaps not reported so widely) there was some hint that 2.5 million of us would be receiving a notice stating that we had overpaid tax.

As it stands currently I haven’t personally received either but I have spoken to a few operatives who have called in to Gabem questioning what they should do if they do receive a P800 (although the likelihood is slim). Our advice is always to revert to HMRC and, to give a ray of light on this grey and rainy day, I heard on the radio this morning that HMRC are actually going to write off all the underpayments – granted this was sourced from HMRC staff - so until further news is released I wouldn’t want to advise you all to relax and ignore if you have received a notification of any kind from HMRC.

Also this month HMRC opened up consultation on ‘improving the operation of PAYE’ and I’m pleased and proud to tell you that Gabem have submitted a response to the discussion. To give a brief outline, HMRC have opened up discussion on two suggestions to improve the operation of Pay as You Earn which is the employment tax system here in the UK. The first suggestion is to have a Real Time Information system whereby as the tax (and any student loan) is deducted (in most cases here at Gabem that’s weekly) HMRC receives that information. This would be a big change as currently tax deducted is usually either reported to HMRC at the end of the financial year or when an employee leaves employment. This solution will certainly make it quicker for sorting out individual’s tax codes which I know from experience here and indeed in employment across the UK does cause a lot of frustration.

The second suggestion which is being discussed is to launch a Centralised Deductions process whereby the employer (in the umbrella case that’s us here at Gabem) no longer has responsibility for calculating and deducting tax and NIC and this is dealt with direct by HMRC. To be honest this suggestion I can’t quite get my head around – it seems as though we Gabem would tell HMRC what you the employee should be paid (gross) and then they would calculate the tax and NIC on it, and pay to your account the net. Of course this takes us into a whole raft of issues – your bank details will be held by HMRC, all your enquiries about when the money will be in your account will have to go through to HMRC helpline, what happens if they have an issue with their internet banking facilities? What if a late payment comes in or we need to amend the first payment sent because of an agency adjustment? What are HMRC’s office/call centre’s opening hours? So.... you can see perhaps that Gabem has fairly logical responses to both suggestions and we perhaps favour one suggestion more than the other!!

Of course this is not something to spend nights awake worrying about... leave it to us to monitor and be assured there will be a while to go yet before we get a sniff of any absolute change.

Enjoy the remainder of the Autumn.

All comments provided on my blog are for informational purposes only. My thoughts and opinions are my own with agreement from my employer as being suitable for sharing with the wider world. Any advice, or writing that might be taken as advice, should not be deemed in any way as professional Legal advice and are only the musings of a HR practioner whose sole aim is to help where she can.