A controversial plan by HMRC to deduct tax directly from employees bank accounting is being considered, it has emerged.
Currently, it is the obligation of employers to deduct income tax and national insurance from employees, and then pass the collected monies on to the tax office.
The new plans appear on a discussion paper regarding simplifying the tax system which states: “HMRC has considered a further, more radical option, centralising the calculation and deduction of tax.”
If this was to go ahead, employers would no longer be responsible for the calculation and deduction of tax and NI. Instead, the tax office would deduct the liabilities before the salary was paid into employees bank accounting.
Whilst there is a widely held desire to improve the current tax system, these new proposals have found little support.
The head of taxation of the Institute of Directors, Richard Baron said: “The suggestion that gross pay might flow to a central computer, which would then pass net pay on to employees, is completely unacceptable. Sooner or later, the system would break down and some people would not get paid.”