What to do with an incompetent Department? Give them more power! At least, that's what HMRC thinks...

Over at City AM, Allister Heath has an extremely troubling column about how the privacy and indeed freedom of all UK taxpayers may be affected by the post-cock-up fallout of the HMRC's latest pathetic tax blunder.

After disastrously miscalculating PAYE tax for millions of people, HMRC is apparently now lobbying for...

a gigantic power grab which could entirely redefine the relationship between the state, employees and their employers.

At present, PAYE income taxes are deducted by employers from their employees’ wages on a monthly basis. Under the most extreme of the proposals, companies would start handing over their entire salaries to the government, in the shape of a “central calculator” run by HMRC. The taxes would then be deducted by HMRC and the remaining amount would be paid by the taxman to employees. Incredibly, HMRC would suddenly become the largest payroll organisation in the world – it, rather than employers, would pay wages.

How do we hate this? Let us count the ways...

• Set-up costs: massive, with thousands of consultants, developers and others being hired; these IT projects are notoriously expensive, invariably go over budget and end up not working properly at all.

• Errors: massive numbers of errors would lead to money being paid over by employers but not reaching employees on the due day. The government's track record with large IT projects makes this a near-certainty. Imagine if 1m people suddenly didn’t receive their pay at the end of the month..

• Ongoing costs: HMRC would have to hire tens of thousands of staff – jobs currently undertaken by payroll or HR departments in private firms – merely to deal with queries, transferring these jobs from the private sector to the inefficient public sector - not only meaning we now all have to pay the wages of these people hitherto employed in the private sector, but making us all liable for their pensions to boot!

• More state control: the coalition is talks about decentralisation and localism. Centralising payroll in a government institution is an unbelievably absurd move in the opposite direction.

• Privacy - what privacy? Will everyone’s salary and taxation level be available online, given that all of the data would suddenly be in one place? Hackers would have a field day. It only needs to be lost once - and once it's lost, it's gone for good. Just ask the 25 million people whose personal details were on the child benefit database, lost in 2006.

But wait, that's not all! HMRC have an additional proposal: real-time information on pay so that tax more likely to be deducted correctly. As Heath points out,

There could be huge costs to employers, who would have to invest heavily in staff and computer systems.

The real danger, however, is that HMRC is also thinking of forcing firms to hand over extra information to the authorities as part of this shift to real-time data. This is unacceptable for cost and privacy reasons. The Institute of Directors has highlighted some of the issues. Is pay frequency really needed? How can employers be expected to know about all third-party payments, in real time? Does the fact that some pay is for holidays matter for tax purposes?

There is yet one more suggestion - that hours worked should be recorded by the state. This would be another odiously authoritarian development. It is almost as if officials are deliberately seeking to kill off corporate Britain and to impose Soviet-style controls on taxpayers.

All in all - a very bad performance today, from a very bad Department.

By Alex Deane

This plan is also well bashed by Jill Kirby of the CPS, over at Centre Right

Comments

[guy herbert]

I think we are about to have a foretaste of what it would mean. If someone in government does not take a hand quickly the Corporation Tax system is about to collapse. HMRC has decreed that from next year all corporation tax returns must be filed online - using an new financial reporting format iXBRL which is currently supported by only a handful of systems providers and none of the standard accounting packages that small companies and their accountants typically use.

http://www.accountancyage.com/accountancyage/features/2262223/ixbrl-ready-here-comes

[Andrew Ampers Taylor]

The British public are like a herd of sheep and will not fight back no matter what happens.

God knows what has happened to the spirit and fight they showed in the second world way, but it has long, long gone.

Ampers.

[Lee]

This information will never be shared with or sold to private interests.

This information will never be shared with or sold to private interests.

This information will never be shared with or sold to private interests.

This information will never be shared with or sold to private interests.

This information will never be shared with or sold to private interests.

. . . . repeat for 18 months . . .

There will be a limited (and closely regulated) sharing of some parts of this information with trusted 'partners' - to facilitate better services.

There will be a limited (and closely regulated) sharing of some parts of this information with trusted 'partners' - to facilitate better services.

There will be a limited (and closely regulated) sharing of some parts of this information with trusted 'partners' - to facilitate better services.

. . . . repeat for 24 months . . .

Where appropriate information will be shared with trusted members of the private sector - in complete partnership with government and under strict regulation.

Where appropriate information will be shared with trusted members of the private sector - in complete partnership with government and under strict regulation.

Where appropriate information will be shared with trusted members of the private sector - in complete partnership with government and under strict regulation.

. . . . repeat for 36 months . . .

"We cannot continue to drag our feet in a changing world, we cannot hope to compete with European member states or on a world stage with such draconian restrictions, business needs help not more red tape."

"We cannot continue to drag our feet in a changing world, we cannot hope to compete with European member states or on a world stage with such draconian restrictions, business needs help not more red tape."

"We cannot continue to drag our feet in a changing world, we cannot hope to compete with European member states or on a world stage with such draconian restrictions, business needs help not more red tape."

. . . . repeat for 12 months . . .

Tesco.

Tesco.

Tesco.

Tesco.

[Lee]

**"The taxes would then be deducted by HMRC and the remaining amount would be paid by the taxman to employees "**

Once the money has been transferred into the 'Central Calculator' - and taxes deducted - the funds would then presumably be transferred into the employees nominated banking account.

I can see a clear temptation here.

Why the need to pay the fund back into another repository when the HMRC could simply issue the money in the same way that banks do, it's not beyond the state - given time - to offer the same facilities, banking cards, cash points, money transfers and so on.

[Peterloo]

This is getting very serious now.

If my payroll department screws up then the few hundred my firm employs are affected. If HMRC National Payroll screws up EVERYBODY is affected.

And you can bet you last penny that there will be compensation for those who incur penalties for late payments due to delays in receiving pay.

This is utter, utter madness and we need direct action now before its gains too much momentum to be stopped.

[Peterloo]

This is getting seriously out of control.

If my payroll department screws up then the few hundred emplyees of my firm are affected. If HMRC National Payroll screws up then EVERYONE is affected.

And you can bet your last penny that there will be no compensation for those who incur penalties for late payment of bills because thie pay was delayed.

This is utter, utter madness and we need to take action now before it gains too much momentum to be stopped.

[Demeter]

Can you please provide a source for the actual HMRC proposals, as opposed to the "Editor's Letter" of a web-site that itself does not link to any primary source.

Ta.

[SadButMadLad]

Here's the IoD press release about the real time data collection issue.

http://press.iod.com/2010/09/15/paye-hands-off-workers-money-say-business-leaders/

[andy5759]

It's all perfectly normal for the coming post-democratic new world order. Cash will cease to exist, replaced with food coupons, travel passes (only for the top Party Chiefs). We will be told where to live, where we can and cannot travel. Oh, I could go on, just look up Agenda 21.

It's a free country, they can ban what they like.

[Purlieu]

There were a few further measures mentioned in small print on page 94 of the document ...
- The calendar is to be reverted back to 1971
- London is to be renamed Peking
- the entire popuplation will be issued with tax rules, which will be a small red book they must carry at all times
- it will be a criminal offence to criticise the State
- photography will be illegal
- currency will be changed back to non-decimal

[The Poet Laura-eate]

Scary. I will be first to march on Parliament.

But does any other country in the Western World (or otherwise) actually do this or would Britain be setting a precedent with this outrageous extreme of state control?

And who would an employee request a payrise from if it went through? Or indeed any other HR services such as adjustment to hours, change of position etc?

[Slacker]

> God knows what has happened to the spirit and fight they showed in the second world way, but it has long, long gone.

Or even as recently as the Poll Tax riots. Sadly I concur that, in the main, the British sheeple wil suck up whatever is doled out to them.

[Alex Deane]

@Demeter, belatedly:

http://www.thisislondon.co.uk/standard/article-23879351-now-taxman-wants-to-take-your-money-before-you-can-even-bank-it.do

[Louis Vuitton Bags]

CO CO CO CO.....I CAN'T STOP, STOP....NO MATTER WAHT THEY SAY I LOVE YOU.....