Written evidence submitted by the Institute
of Payroll Professionals (IPP)
EXECUTIVE SUMMARY
The Institute of Payroll Professionals (IPP) was
established as an official industry body in 1985 when the Institute
of British Payroll Managers (IBPM) was formed. In 1998, the
IBPM merged with the Association of Pensions and Superannuation
Administrators (APSA) to form the Institute of Payroll and Pensions
Management (IPPM), which became the IPP in September 2006. On
10 November the Privy Council approved the grant of Royal Charter.
The Institute expects to be rebranded on the 1 January 2011 to
the Chartered Institute of Payroll Professionals. Further information
about the IPP can be found in Appendix A.
HMRC have over the last few years pledged to make
the tax system more transparent, resulting in an easier tax system
for individuals and businesses to understand. Although still some
way to go overall the IPP does believe that HMRC is striving to
meets its aims and objectives. Although there is still some frustration
felt from employers about HMRC's understanding of their business.
Having read the HMRC Business Plan the IPP is pleased
to see that additional money has been set aside for programme
spending in 2011-12. As stated in the main document the IPP is
concerned that the Spending Review has not allowed sufficient
money for the administration of enhancements, and is concerned
this may lead to a further lack in confidence by HMRC's customers.
The new HMRC system (NPS) coupled with the PAYE Review
and Real Time Information (RTI) should assist in delivering HMG
aims on tax compliance. It will be crucial that the tax compliance
policies are adhered to, and the IPP will support HMRC via consultation
and facilitation of best practice for payroll professionals.
The PAYE system works extremely well but has not
moved with the times. The system does need to improve as the government
will not accept the current levels of incorrect tax code issue.
Real Time Information will cost employers through their payroll
software providers' copious amounts of money to change the current
end of year reporting. However the IPP understand that by using
the BACs system it is more likely that HMRC will control the uploading
of data at a time to suit HMRC. This in turn concerns the IPP
as will this measure really improve the correct issuing of tax
codes?
HMRC's priorities should be improved customer contact
whether online or in person.
Better customer contact would assist in changing
the tax payer's perception of HMRC. The IPP provides support to
all government departments but in particular HMRC, and at the
same time gives a voice for employers.
In conclusion we believe that in addition to customer
contact, and working with representative bodies that HMRC should
strive to deliver a more efficient tax system in line with the
Coalition priorities.
1. HMRC's performance as an organisation and
whether it is delivering its key aims
1.1.1 HMRC have over the last few years pledged
to make the tax system more transparent, resulting in an easier
tax system for individuals and businesses to understand. The Business
Plan published earlier this month confirms that this is still
part of HMRC's vision. The reality is that most individuals do
not want to know how the tax system works, just that it does work.
One of the most trusted systems until recently was the PAYE system.
From anecdotal evidence within the IPP, we found that employees
trust their payroll department to deduct the correct tax and National
Insurance Contributions. They also understand that payroll operates
the system via a tax code.
1.1.2 Earlier this year when the national media
highlighted the under and over payments of tax, the credibility
of HMRC plummeted. In light of this the IPP ran a survey containing
just one question with five possible answers to choose from. The
question and answers available were the same as those used by
an accountancy representative body. The IPP wanted to understand
whether the views of the payroll profession were different to
those in the accountancy profession. The comparison has not yet
been carried out as the survey only closed on Friday 12 November.
However the results which can be found in Appendix B showed that
of the sixty six respondents nearly 35% felt that it was a mess,
but that the New PAYE System needed time to "bed in".
This is also the view of the IPP. The new system was designed
to improve the tax system and it did what it was meant to do.
Albeit this meant a huge number of tax notifications were sent
to individuals with some being an unfavourable notification; it
does mean that there are many more individuals now paying the
right amount of tax.
1.1.3 In order for HMRC to deliver its key aims
it is vital that sufficient monies are allocated to allow them
to do this. Many might argue that by stream lining processes or
removing one to one contact will reduce costs, however this will
not necessarily improve customer service or customer confidence.
Anecdotal evidence from the IPP members suggests that there is
frustration amongst employers as they do not feel HMRC staff understand
their business. This is mainly due to contact centres, rather
than being allocated a tax inspector. HMRC have addressed this
area to some degree by having Customer Account Managers, but many
feel this is only for the large employers, leaving the smaller,
more vulnerable employers to fend for themselves.
1.1.4 With HMRC's core purpose being to make
sure that money is available to fund the UK's public services
and support individuals, one must ask is customer service a priority
and should valuable funds be provided to improve this area? HMRC
states that by 2015 they want to have a flexible and more efficient
system when dealing with customers and they have a number of initiatives
that the IPP believes will assist them in achieving this goal.
The implementation and delivery of the Change Programme will be
vital as will the "One Click" registration process.
1.1.5 Employers and individuals were mandated
to use online facilities for reporting, and now most embrace this
technology and want a lot more communication with HMRC on line.
The introduction of Real Time Information may improve this and
is discussed later in this submission.
1.1.6 From the IPP's perspective HMRC have made
huge improvements over the last five years, quite often under
pressure both financially and due to the lack of resource. The
IPP knows that HMRC has highly qualified and competent staff and
not enough credit is given to these civil servants. It is the
experience of the IPP's Policy team that the consultation process,
albeit some areas could be improved, is an excellent example of
how government departments can work with external stakeholders.
HMRC's attitude previously was that they knew what employers/payroll
wanted, however over the last five years they have demonstrated
that on the whole they ask first before introducing policy or
operational changes. There is always room for improvement but
in order to do this money must be set aside for consultation.
2. What the implications are of HMRC's spending
review settlement?
2.1.1 Having read the HMRC Business Plan the
IPP is pleased to see that additional money has been set aside
for programme spending in 2011-12. The IPP would question whether
this was a sufficient sum, however without having a breakdown
of the spend we need to reserve judgment on the actual amount
allocated. The programme spending is set to increase in 2011-12
and again in 2013-14 presumably for the Real Time Information
and "One Click" initiatives already planned. The IPP
does however have concern that the administration spending allocation
will gradually be reduced.
2.1.2 The IPP understands that savings must be
made, and that by investing in programmes this should result in
a reduction of administration costs. The IPP would however prefer
that any new programmes and or technology is allowed a long period
to "bed in" before looking to reduce the budget for
administration. Confidence levels in new technology have improved,
but the future changes should not be underestimated. These require
not only an understanding of different technology, but a different
way of communicating with HMRC. A major culture change will be
required by both business and individuals. It will also require
culture change within government departments. Morale is believed
to be low now in HMRC and other government departments, it is
vital that time is given to change attitudes, otherwise any new
advances will not be received well, and will surely set them onto
the path of failure?
3. Whether HMRC is able to deliver the Government's
aims on tax compliance
3.1.1 From a PAYE point of view, various changes
to the Finance Act have introduced anti-avoidance measures eg
mandatory e-filing, penalties for filing paper returns, and for
those who do not submit the correct in year payment of PAYE and
National Insurance Contributions. The new in-year regime has replaced
the previous surcharge regime; however for employers there still
remains an end of year expectation as HMRC do not have the required
systems and processes in order to police the new risked based
regime. The new NPS system coupled with the PAYE Review and RTI
should assist in delivering HMG aims on tax compliance. This comment
links to the issue below and supports the need for a PAYE Review.
Based on what we know to date the PAYE Review proposals should
help in achieving tax compliance.
3.1.2 It will be crucial that the tax compliance
policies are adhered to, and the IPP will support HMRC via consultation
and facilitation of best practice for payroll professionals to
make sure this happens.
4. Whether PAYE reform is necessary?
4.1.1 Based on the dissatisfaction from HMRC's
customers after the P800 release it has to be reviewed. The PAYE
system works extremely well but has not moved with the times.
When it was introduced most people had one job, and stayed in
that job until retirement. They would then receive one pension,
normally from the State.
4.1.2 An increasing number of people now have
two or more incomes, such as students and part-time workers. Add
to that the economic climate where some have to hold two jobs
the previous system (COPS) was unable to cope. The intention of
NPS is that it will know an individual's circumstances for tax
purposes and allocate the tax code splits accordingly.
4.1.3 Unfortunately this system has not had time
to bed in, and a knee jerk reaction was seen by government to
improve the system. In fact many government ministers were implying
that the system was broken! This is not a view shared by the IPP.
4.1.4 The system does need to improve as the
government will not accept the current levels of incorrect tax
code issue. There were two solutions presented to businesses first
one being the introduction of Real Time Data followed by Centralised
Deductions.
4.1.5 The IPP and its members have on the whole
supported the RTI concept but did not agree that Centralised Deductions
would reap a return on investment for either HMRC or the individuals.
4.1.6 Due to the knee jerk reaction the concern
of the IPP is not whether Real Time Information should happen,
but the timescale in which it is to happen. Many believe within
the IPP membership that it is being driven by politics, and the
need for the coalition to "make their mark" rather than
helping HMRC be more efficient.
4.1.7 Real Time Information will cost employers
mainly through their payroll software providers, copious amounts
of money to change the current end of year reporting. This is
not due to having to complete payroll returns, as most organisations
will carry out a reconciliation each pay period anyway, but more
so in the way that communication is sent to HMRC.
4.1.8 Employers invested in technology to meet
the online filing conditions, however the intention is that employers
will need to use a different method to communicate in the future
via the BACs system. The IPP in its response to the short consultation
on RTI found that its members would prefer to use the existing
technology rather than use the BACs technology. It is the belief
of the IPP that it was assumed that most employers pay their employees
via BACs. Whilst this will be an accurate statement employers
are not convinced that using this method to transmit data to HMRC
is the right way to go.
4.1.9 RTI would work best if information from
employers could be uploaded in the NPS and act on the information
in real time. However the IPP understand that by using the BACs
system it is more likely that HMRC will control the uploading
of data at a time to suit HMRC. Although the IPP understands the
need for control to ensure the NPS can handle it, we are not yet
sure we understand how this will improve the issuing of tax codes
on a more timely basis, as the data could be out of date if two
transmissions are submitted to HMRC by different employers and
both not acted upon?
4.1.10 The introduction of RTI would also need
to encompass benefits in kind as the IPP believes this might be
a major contributor to individuals not being on the right tax
code.
4.1.11 In respect of the proposal of Centralised
Deductions the IPP does not currently support this way of calculating
tax and NI etc for individuals. Contrary to belief this is not
due to fear of losing jobs within the payroll profession, more
so that the IPP does not believe individuals have sufficient interest
in the tax system to ensure their tax codes are right. Employers
and payroll professionals pride themselves in carrying out the
payroll calculation of gross to net to ensure their customers
ie employees receive an excellent standard of service, and receive
their pay accurately and on time.
5. What HMRC's priorities should be for the
future?
5.1.1 Improved customer contact whether online
or in person. There is quite often a lack of consistency within
HMRC contact centres. This in turn leads to employers carrying
out their obligations in different ways, all approved by HMRC.
This then results in HMRC not having accurate data to ensure compliance
or assistance is delivered in an effective way.
5.1.2 Better customer contact would assist in
changing the tax payer's perception of HMRC. Being able to build
relationships with your tax office would mitigate some of the
other processes that let employers down.
5.1.3 From a stakeholder point of view, it is
important that HMRC continues to recognise the skill and knowledge
of organisations such as the IPP. The IPP provides support to
all government departments but in particular HMRC, and at the
same time gives a voice for employers. The IPP is able to assist
all parties by identifying issues that would prevent HMG and employers
from suffering unnecessary burdens and costs.
APPENDIX A
ABOUT THE INSTITUTE OF PAYROLL PROFESSIONALS
The Institute of Payroll Professionals (IPP) was
established as an official industry body in 1985 when the Institute
of British Payroll Managers (IBPM) was formed. In 1998, the
IBPM merged with the Association of Pensions and Superannuation
Administrators (APSA) to form the Institute of Payroll and Pensions
Management (IPPM), which become the IPP in September 2006. On
10 November the Privy Council approved the grant of Royal Charter.
The Institute expects to be rebranded on 1 January 2011 to the
Chartered Institute of Payroll Professionals.
The IPP is the only membership body for payroll professionals
in the UK and currently has in excess of 5,000 members enjoying
a range of benefits. In addition, the IPP is the UK's leading
provider of qualifications, training and consultancy for payroll,
and has a Pensions Faculty responsible for delivering qualifications
and membership services to those responsible for public sector
pensions.
The mission statement of the IPP is:
Leading payroll and pension professionals through
education, membership and recognition.
EDUCATION
The IPP is the leading provider of qualifications,
training and consultancy for payroll professionals in the UK. Our
payroll qualifications programme was originally formed in 1991
and is updated each year. The latest developments to our
payroll programme led to the introduction of a Foundation Degree
in Payroll Management accredited by Worcester University being
introduced in September 2008, which utilises online and face to
face learning methods. The payroll qualifications programme
goes all the way to MSc in Business and Payroll Management and
aims to get more payroll staff in the boardroom.
Our pension qualifications currently focus on Local
Government Pension Schemes and are being extended to all public
sector pensions going forward. The most recent development is
the introduction of the Foundation Degree in Pensions Administration
and Management for students enrolling for Autumn 2010. This new
qualification is accredited, subject to approval, by Leeds Metropolitan
University and covers all the latest developments in the Local
Government Pensions arena.
As well as our industry recognised qualifications,
the IPP boasts a wide range of payroll training courses to increase
professional knowledge in specific areas such as statutory payments,
termination payments, overpayment recovery and changes to legislation.
And we have recently re-launched our Pensions for Payroll Professionals
training course.
MEMBERSHIP
The IPP is the only professional body for individuals
working in payroll in the UK, and has a separate Pensions
Faculty to represent public sector pensions professionals. The
IPP has an excellent position within government to represent
our members' views, enabling us to keep you abreast of all the
legislation changes that have come into effect or are in the pipeline
through a number of communications channels including:
— News
On Line - weekly e-newsletter.
— PayrollProfessional
magazine issued ten months a year.
— Advisory
Service helpline which you can call on during office hours.
— Members
only sections of the website to network and discuss topical issues.
RECOGNITION
The IPP is working hard to increase recognition towards
the importance of payroll in business and achieve Chartered status
for the profession. The policy team are now representing
members' views at over 60 government consultation forums which
highlights that HMRC and other government departments recognise
the important part that payroll plays in the UK economy
APPENDIX B
SURVEY RESULTS
What do you think of HMRC's handling of the 2010-11
PAYE reconciliation process?
| Answer Options |
Response Percent | Response Count
|
| PAYE system is 66 years old: bring on real-time information.
| 10.6% | 7 |
| Yes, it's a mess, but let NPS bed in and work with HMRC to make it better.
| 34.8% | 23 |
| Yet another episode in HMRC's long history of IT disasters.
| 25.8% | 17 |
| A result of cutbacks & declining morale - more funds needed.
| 13.6% | 9 |
| Proof that HMRC is not fit for purpose. Current managers must go.
| 15.2% | 10 |
| answered question
skipped question
| 66 |
| 0 |
November 2010
| 
