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Integrating the operation of income tax and National Insurance Contributions - CIOT comments

The CIOT comments, sent to HMRC on 19 September 2011, on the Government's call for evidence as part of its consideration of the integration of the operation of the income tax and National Insurance contributions systems.

The call for evidence document poses 14 questions (reproduced below for ease of reference), the majority of which focus on the burdens employers and payroll professionals face in paying income tax and NICs through the Pay As You Earn system. There are no proposals (at present) to merge the two. The main focus of the questions is on the burdens faced by employers in the day-to-day operation of the taxes but the burdens on the self-employed should not be overlooked.

Our submission, along with the consultation document to which it refers, are available in Adobe (pdf) format.

Content

Section 1: General Interest

1. The Government believes that integrating the operation of income tax and NICs may have the potential to remove distortions, reduce burdens on business and improve fairness. Do you have any comments on these objectives?

2. Of the differences between income tax and NICs listed in Table 1.A [reproduced below] (or any others that you consider important) which do you see as the most significant in terms of their impact on:
a) economic distortions;
b) burdens on employers;
c) fairness?

3. What do you think are the most important steps that could be taken to reduce the effects on: a) economic distortions;
b) burdens on employers;
c) fairness?

Section 2: Employers and Payroll Professionals

General

4. Under the current system, how much staff time and/or other resource is required to carry out income tax and NICs processes? Please give a score on a scale from 1 to 5 where 1 is only a small amount of time/resource and 5 is a great deal of time/resource for each of the following:
a) Familiarisation: understanding HMRC’s requirements, legislation and guidance.
b) Retrieval of information: obtaining the information required to run a PAYE payroll.
c) Record keeping: maintaining the records needed for income and NICs purposes, eg keeping copies of returns/letters where necessary.
d) Calculation: calculating and checking income tax and NICs due (including in-year and end of year processes).
e) Provision of information to HMRC: reporting of information to HMRC, eg P45s for new employees.
f) Provision of information to employees: reporting and providing information to employees e.g. year end P60s.
g) Payment of liabilities: paying income tax and NICs to HMRC.

5. Which aspects of the current income tax and NICs process work well for your business?

6. Do you carry out income tax and NICs obligations together? Are there any elements you carry out separately?

7. What effect do differences between income tax and NICs have on wider payroll processes such as expenses and benefits, statutory payments and student loans deductions?

8. Which of the differences between income tax and NICs are dealt with largely automatically by payroll software and which require significant manual working? Where manual working is required how straight forward is this?

Issues and Errors

9. Are there particular issues that occur in the calculation of income tax and NICs?

10. How often is it necessary to correct income tax or NICs calculations and which are the most time consuming to correct?

Software

11. Do you have any comments about difficulties in designing or using software resulting from the differences identified in Table 1.A (or any others that you consider important)?

International

12. What do you see as the main differences between income tax and NICs in relation to employees you have who work internationally?

13. Which of the differences outlined in question 12 are dealt with largely automatically by payroll software and which require significant manual working? Where manual working is required how straightforward is this?

Interaction with other reforms

14. Do you have any views on how the introduction of Real Time Information (RTI) may affect the cost and benefits of income tax and NICs integration?


Technical Team

20 September 2011

 

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