The Tory party is looking at ways to change the way employees pay NICs and income tax contributions. This could create significant savings to contractor umbrella companies and interim recruiters with large numbers of PAYE contractors.
At present employers deduct these contributions at source and forward the monies to HMRC. Although the government department provides tax codes for each individual, it is still left up to the employer to do the calculations. With the Tories’ proposed system, all they would to do is ensure that the right NI number is associated to the payment.
The Conservatives are now investigating the viability of a new bank-based system that would deduct these contributions automatically from an employee’s gross pay. They believe that this would not only save companies up to £5.5bn, but also increase the HMRC’s revenues by £1bn.
The Shadow Treasury minister, David Gauke said that the current system is onerous for everybody concerned and there is an urgent need for us to move to a real-time Pay As You Earn system where contributions are automatically deducted from gross salaries.
The Conservatives are already holding discussions with some of the IT providers who are developing the system.
Being used as unpaid tax collectors can be a huge weight for smaller businesses and this new technology could help to reduce the administrative burden on SMEs according to tax partner at Grant Thornton, Mike Warburton.
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Image: Tax by alancleaver_2000
