Conference 24th March Review

I attended the PayrollWorld Spring Conference last week with the express intention of learning more about HMRC’s plans for Real Time Information (RTI) and Centralised Deductions.  Centralised Deductions is the radical plan for employers to send all of our wages including company NIC to the Inland Revenue and they deduct Taxes and submit the remainder to our bank accounts.

The panel members debating the pro’s and con’s of this plan were supposed to be as follows:

  • Philip Whiteley (Chair), editor, Payroll World
  • Yvette Lamidey, managing director, Paris and Parks Consulting
  • Peter Hopkins, assistant director in personnal tax, HMRC
  • Matt Boyle, research assistant, Research4paye
  • Stephen Abbotts, head of payroll, Capita HR Solutions
  • Richard Crum, head of payroll, Boots

Peter Hopkins ducked out and so we had a stand in called Phil Nilson who’d previously given an entertaining HMRC update for 2011.

The audience had a vote before the debate asking whether we thought that “RTI was a good idea”.  46 said it was a bad idea and 32 said it was good.  A lot of people didn’t vote!

Yvette Lamidey set out the framework for introducing RTI.  She said it wasn’t “worth getting worked up” about centralised deductions as they will only happen if RTI doesn’t work in the form currently proposed.

RTI will work by utilising the BACS system which is the system currently used to instruct our banks of payments to make to our employees.  The file used will be altered to not only include bank details and net pay but also National Insurance and Tax year to date values, p45 data and starter and leaver information.  HMRC will reconcile the PAYE received to the BACS file.  HMRC will not have access to the whole file, it will get uploaded to a “repository” the location of which is unknown.  It will probably be necessary for employers to do a monthly reconciliation similar to that which happens at payroll year end.

The pilot project will begin from this year April 2011 to April 2012 and will be undertaken by the very large employers.  Small employers will have to take part in Real Time information in 2013.

We were told about the motivation behind RTI, that it was done with a view to the Universal Credit (a replacement for the current benefits system).  Also it was an effort to combat tax credit fraud and also the problem of under/over payments of tax for those in multiple employments.

After this enlightening and interesting talk by Yvette, the panel were open for questions.

There was some hesitation from the Audience so I raised my hand.  I asked (whilst being photographed and worrying about my appearance), “Why are HMRC considering using the BACS system for this project when the current internet portal could serve the purpose perfectly well?”

There was a (tongue in cheek) suggestion by Yvette that HMRC might be so heavily involved with Vocalink, the developers behind the current BACS system that an alternative mechanism would mean writing off a lot of money previously invested.

There were a few blank looks by the panel and a bit of shrugging of shoulders after which the conclusion was made by Phil Nilsen that HMRC wouldn’t have “gone down the BACS route” if the process hadn’t been fully researched, very reassuring.  He couldn’t tell me what this research was as he gestured to the ceiling saying that it was done by “them up there”.  I took this to mean his superiors or people in other HMRC departments.

I followed up by asking why RTI couldn’t be achieved with a monthly reconciliation along with the current web based portal.  This question couldn’t be answered and was met with varying degree’s of shrugging and head shaking.  Phil Nilsen then remarked; “we’ve only just finished the consultation”, suggesting (to my mind) that the BACS route may be changed, although I would seriously doubt it.  You see, I believe that the whole reason for using the BACS system originates from the plan to use centralised deductions.  If HMRC was going to implement centralised deductions then the BACS system would be the perfect vehicle.

Yvette did however state that some of the responses to the consultation had “changed some of the thinking” at HMRC.  I bet it has, I suspect that HMRC now think if we change the BACS system enough for RTI, then proceeding to centralised deduction is just a small step away.

It is my prediction that Centralised Deductions, or employees working for the state and not their employer is already in-process.  It is happening and the government don’t really care about any kind of response to the consultation.

About Jason

I am the Managing Director at Bar 2, father of 1 and brother of 2. Enjoy blogging, twittering and generally communicating on the internet, family time and working.
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