Will PAYE pooling create larger targets for HMRC?

Baker Tilly, the UK chartered accountants, has warned that HMRC’s proposal to allow employers to pool PAYE returns could create larger targets for the taxman.

Under the current system, all entities have their own PAYE reference, even if they form part of a larger corporation, and they are each responsible for sending their employer returns to the Revenue and making payments.

HMRC has now suggested that this is an unwelcome administrative burden and treating connected entities as a single entity for the purpose of PAYE could ease that burden.

If the Revenue decides to push ahead with PAYE pooling a parent company would have a PAYE reference and the entities within the group would make joint returns and combined payments to HMRC.

Baker Tilly says that this system would reduce the administrative costs for the employers, but there is the potential that the parent company would become a target for compliance visits. Martin Benson pointed out if HMRC finds any discrepancies in employer records, it estimates tax arrears, penalties and interest based on the size of the payroll. If several employers are in a pool, that estimate will be calculated on the total amount of employees and not the number employed by one pool member.

Payroll pooling is the latest proposal to reform the PAYE system, which was first introduced back in 1944. Other plans include real time payroll reporting and the centralised collection of NIC and income tax.

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