Tags: UK | Tax | Office | Paychecks

UK Tax Office Wants to Get All Paychecks First

Tuesday, 21 Sep 2010 09:53 AM

British tax collectors want U.K. employers to let the tax office decide how much tax employees should pay — and send employee paychecks to the government instead of to the people who earned them as well.

Under the terms of a proposal put forth by Her Majesty's Revenue and Customs, all paychecks would be mailed to the tax office, which would take its cut before transferring the after tax money to workers’ bank accounts.

However, even though doing so would offer some much-needed oversight, there are some major concerns about the proposal, according to George Bull, head of Tax at Baker Tilly.

"If HMRC has direct access to employees' bank accounts and makes a mistake, people are going to feel very exposed and vulnerable," Bull told CNBC.com, adding that HMRC does not have a good track record of handling large computer systems and has suffered high-profile errors with data.

Bull also says the proposed system would require the tax office to successfully handling massive amounts of data.

"There has to be some very clear understanding of how quickly repayments were made if there was a mistake," he notes, and the cost of implementing the new system would be "phenomenal."

Moreover, Bull points out, the centralized storage of so much data poises a security risk due to cyber crime.

The tax office says the current system, which allows employers to provide employee payment information at year’s end and doesn't provide for employees to refuse withholding and individually file a tax return at the end of the year, lacks sufficient real time information.

It also estimated the potential savings of about $700 million to employers under the proposed system.

"It's very clear that the system does need to be modernized. It's outdated, it's
outmoded," Emma Boon, campaigner manager at the Tax Payers' Alliance, told CNBC.com.

Boon says the Tax Payers' Alliance favors simplifying tax collection, but questions the tax office’s ability to do so.

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British tax collectors want U.K. employers to let the tax office decide how much tax employees should pay and send employee paychecks to the government instead of to the people who earned them as well. Under the terms of a proposal put forth by Her Majesty's Revenue and...
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