PAS Notes

Graham Whitehouse

PAS Ltd Response to HMRC’s Agent Consultation

By Graham Whitehouse | 19 September 11 | In: P11D News

HM Revenue & Customs

Below is the response that we have today given HMRC on their Consultation into Establishing the future relationship between the tax agent community and HM Revenue & Customs

Consultation Document >

The consultation paper makes for very interesting reading. We at PAS Ltd are in the business of producing benefits software, the “P11D Organiser” and providing associated P11D bureau services. Our products and services enable both the employer to pay the correct amount of Class 1A NIC and their employees to pay the correct amount of tax on benefits-in-kind provided to them. Generally we are in favour of any proposals that will allow taxpayers to pay the right amount of tax at the right time. We understand that one of the biggest reasons preventing this from occurring is the current system of reporting P11Ds to HMRC just once a year. The correct solution would provide this benefits information in real time. The current system attempts to do this in a limited fashion with company car information only, via quarterly P46 submissions. However it is our experience that these are rarely processed.

It is our view that it is the difference between actual benefits received in the previous year being coded out as an estimate in the current year that leads to many employees paying the wrong amount of tax. We have a software solution that enables employers to determine taxable benefits in real time. We are currently payrolling benefits for a number of large employers in the UK and the Republic of Ireland.

We recognize this consultation could provide an alternative route to the payrolling of benefits by employers and would like to participate in the pilot scheme. The pilot exercise mentioned in the consultation document appears to be primarily aimed at accountants (who represent individual taxpayers) being allowed access to amend their client’s tax codes. However, most employees who do not receive a self-assessment tax return are unlikely to have an accountant acting for them. This means that these proposals will not affect the majority of employers and their employees will continue to pay the wrong amount of tax.

Our experiences at PAS Ltd as the market leader for P11D software in the UK, make us well versed in the benefits reporting process. It is our view that your current proposals should be expanded to include those agents that provide a bureau service for employers. It can even be argued that the employer should be classified as a de-facto agent as it is often the payroll department that unrepresented employees will turn to when they have a query with their tax code.

Most payroll professionals are members of the Chartered Institute of Payroll Professionals so a set of standards could be devised for payroll mangers to adhere to, similar to the ones being proposed for the other recognised accountancy bodies. Once the employee authorises their payroll department (or the bureau service provider) to act on their behalf it is our opinion that payroll staff are even better placed to amend their employees’ tax codes than accountants.

This approach will lead to significant across the board savings for HMRC as a lot more employees will have paid the correct amount of tax in-year and will not require subsequent assessments of tax. The added advantages of allowing all agents including accountants, bureau service providers and employers to make direct changes to an employee’s tax code include: -

  • NPS will be able to tax benefits-in-kind at the correct tax rate of 20%, 40% or 50%. This cannot always be achieved by the payroll department if they choose to payroll benefits. This is because the payroll department is not aware of their employees’ other income sources so cannot always apply the true marginal rate of tax to payrolled benefits.
  • NPS will contain full information of the benefit types the employee is in receipt of on a real-time basis. This information will be essential to the Department of Works & Pensions when it comes to them assessing an employee’s eligibility to the proposed new Universal Credit.

As mentioned previously we at PAS Ltd are extremely interested in participating in the pilot programme. As well as providing P11D software to over 1,000 clients to process over one million P11Ds annually we also offer a bureau service to some very large corporations. We already have considerable experience of consulting with HMRC’s Policy Unit on other issues. Our standing in the industry has allowed us to be invited as a stakeholder in the consultation to payroll benefits and we are the BASDA representative on HMRC’s Benefits and Expenses sub-group.

As an ISO 90001 accredited software house dealing with large financial institutions we are well versed in the data protection provisions surrounding handling sensitive data and have obtained independent verification that our security protocols are sufficient to satisfy a major high street bank.

We can offer an invaluable insight of how these new proposals can be extended to offer maximum benefits to both taxpayers and HMRC and we look forward to be involved in the pilot scheme.