Yesterday the Telegraph quietly reported that the Conservatives are planning the ‘biggest PAYE shakeup’ since the scheme began during the second world war. The idea is:
Rather than leaving employers to process different tax codes and pay income tax for employees, the new system would automatically deduct income tax and national insurance contributions directly from an employee’s gross pay as it is paid into their bank account.
Apparently various technology providers are being approached.
This is just a bit of steamlining isn’t it ? cheaper and easier for employers ? completely innocent ?
Well no. Not when you consider how it would have to work.
If PAYE was deducted directly by ‘the new system’. The money would have to go through the ‘new system’ before it reached you.
So if the brewery pays a monthly salary to Tom, Dick, and Harriet. It will send all of that money to HMRC, HMRC will take what it believes is its due and pass the remainder on to Tom and the others. There are a number of ugly little implications.
First of all, the majority of money flowing into a standard bank account would now come from the government. Most people’s income comes from employment with lesser amounts from tax credits pensions etc. Effectively, most of us would be beholden to the government for our daily bread. The level of control this would allow them puts anything the old communist states ever managed into the shade. What’s this unexplained £30 payment from your auntie Lavinia ? Why didn’t you pay income tax on it ?
Secondly, even ignoring malice, the possibility of common or garden screw up looms large. In the same story the Telegraph reports some 4.5 million workers are paying too much PAYE – one flick of a switch at HMRC and that could be 20 million workers. Not that that would ever be done deliberately would it ?
This disastrous idea comes from a collective mindset that thinks the State Should Be In Charge. The truth of the matter is that both this notion is endemic throughout Labour (of course) but also the Tories and Lib Dems. I don’t believe that any of the big three parties are on our side – they are on their side.
Things will not get better under the next government whatever it’s hue. Things will get worse.
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{ 2 comments… read them below or add one }
My business generates large amounts of cash (as opposed to electronic payment methods) and although all of my employees have a P11 (and the associated tax registration) they all get paid with hard cash rather than electronic transfer. A number of them don’t have a bank account.
I can’t see me rushing to change that arrangement.
I wonder how many adults in the country don’t have a bank account ? How long until having an account is mandatory ? The government does own a number of banks after all.
The bottom line is that if you are going to make a change to PAYE that significant, the odd legislative tweak here and there to catch cash businesses is not going to be much of a stretch. We may not have the choice.
I suspect this idea has been floated out the door quietly to see if anyone twigs to the implications and if there’s going to be much reaction. I think we should all scream blue murder about it. At this rate Con and Lab will be level pegging before the election.
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