A Shropshire accountant has welcomed new rules that require employers to re-think how and when they notify HM Revenue and Customs about tax transactions.
Chris Dorricott, from Dyke Yaxley, Chartered Accountants, in Shrewsbury, said currently employers send details of payments and statutory deductions for all their employees to HMRC at the end of the tax year.
“But where some employees have more than one source of income, this can lead to tax code errors, because it’s not always picked up that they are not paying the right amount of income tax.
“So when the employee information is eventually sent in, it can be months if not years before the adjustments are made to correct the code.”
Chris said the current system had created the regular issue of tax refunds to some and big tax bills to others in order to balance the books.
“This is all to do with the National Insurance and PAYE system (NPS) that was introduced in 2009.
“It is actually a very positive move that all these tax code errors have been picked up by the new system as it means the information HMRC hold is gradually becoming cleaner and more accurate.”
And now, to ensure people are paying the right tax at the right time, HMRC has introduced its “real time information” scheme.
“The new rules will take effect in October 2013, and mean that the information normally sent at the end of the financial year will need to be sent to HMRC before or at the same time as a payment is made to your employee.
“This is great news in the longer term, as the information will be more up-to-date and so more accurate – this will also mean the current Annual Employer Return process will end.
“So whether you pay weekly, fortnightly or monthly, all information must be sent to HMRC every time you pay someone.
“Make sure your systems are ready and that your business is prepared for the new rules – they will make a real difference to you and to your staff.”
Chris Dorricott, Dyke Yaxley’s Payroll Manager