New PAYE proposals could see recruiters out of pocket with mounting cashflow problems, according to workforce management solutions provider giant precision.

Last month, HMRC launched a consultation document outlining plans to require employers to submit PAYE information as part of the employee payment process.

While the decision to introduce this change has been taken, the document gives an opportunity to influence:

·     the data items to be submitted with the payment

·     the process of transition to the new system

·     the identity management process

·     whether or not there is a need to relax the requirement in the case of certain small employers, and

·     who these employers might be.

Giant precision says the logical next step for HMRC after introducing RTI will be to require employers to pay HMRC the PAYE tax and NI deducted at the same time as employees are paid on each pay run. Currently employers normally pay employees weekly or at the end of the month, but only pay deductions to HMRC on the 19th or 22nd of the following month.

Matthew Brown, managing director of giant precision, predicts: “The transition to real-time information will impose significant one-off costs on recruiters who run their own PAYE payroll.

“The concern is that real-time information will be a slippery slope. Once employers are providing information on pay and tax with the BACs payment on each pay run, HMRC will argue that it makes sense for the tax and NI deducted be paid at the same time as the payroll, rather than on 19th or 22nd of the following month.”

He adds: “Many recruiters are already grappling with cashflow problems caused by ‘pay when paid’ clauses inserted into contracts by recruitment process outsourcing companies. These PAYE proposals will only add to their woes.”

The closing date for comments is 28 February 2011.