ICAEW REPRESENTATION 76/15 (TAXREP 29/15)

Transcription

1 ICAEW REPRESENTATION 76/15 (TAXREP 29/15) AUTOMATIC ENROLMENT ICAEW welcomes the opportunity to comment on the consultation document: Helping users of HMRC's Basic PAYE Tools undertake automatic enrolment calculations, published by The Pensions Regulator on 24 March This ICAEW response of 19 May 2015 reflects consultation with the Business Law Committee and the Tax Faculty. The Business Law Committee includes representatives from public practice and the business community. The Committee is responsible for ICAEW policy on business law issues and related submissions to legislators, regulators and other external bodies. The Tax Faculty is a leading authority on taxation. It is responsible for making submissions to tax authorities on behalf of ICAEW and does this with support from over 130 volunteers, many of whom are well-known names in the tax world. The Institute of Chartered Accountants in England and Wales Chartered Accountants Hall Moorgate Place London EC2R 6EA UK T +44 (0) F +44 (0) DX 877 London/City icaew.com

2 ICAEW is a world-leading professional accountancy body. We operate under a Royal Charter, working in the public interest. ICAEW s regulation of its members, in particular its responsibilities in respect of auditors, is overseen by the UK Financial Reporting Council. We provide leadership and practical support to over 144,000 member chartered accountants in more than 160 countries, working with governments, regulators and industry in order to ensure that the highest standards are maintained. ICAEW members operate across a wide range of areas in business, practice and the public sector. They provide financial expertise and guidance based on the highest professional, technical and ethical standards. They are trained to provide clarity and apply rigour, and so help create long-term sustainable economic value. Copyright ICAEW 2015 All rights reserved. This document may be reproduced without specific permission, in whole or part, free of charge and in any format or medium, subject to the conditions that: it is appropriately attributed, replicated accurately and is not used in a misleading context; the source of the extract or document is acknowledged and the title and ICAEW reference number are quoted. Where third-party copyright material has been identified application for permission must be made to the copyright holder. For more information, please contact: representations@icaew.com icaew.com

3 MAJOR POINTS 1. We welcome the Pension Regulator (tpr) proposal to develop a tool to help employers comply with their auto-enrolment (AE) obligations. HMRC already provides a free payroll calculator called Basic PAYE Tools (BPT) for small and micro employers to assist them in complying with their income tax and National Insurance requirements. We query why the BPT will not be updated to provide users with AE functionality, as it would make a lot more sense if this functionality formed part of BPT. It should at the very least be accessible from HMRC, rather than via two different government websites. The fact that the functions cross two government departments should not be allowed to stand in the way of an integrated product, as employers have to deal with both tax and AE obligations in one process. 2. We also query the premise behind Q3 below: why should BPT users be incentivised to seek an AE solution from the marketplace? BPT users, who are by definition the smallest and least well-resourced employers, should not be required to buy payroll software in order to be able to comply with government-imposed AE duties. tpr has correctly identified the risk that this group of employers is likely to have the most difficulties in complying with their AE obligations, so it is incumbent on tpr to minimise that risk by minimising the imposition on the group. 3. Many small employers who use BPT will be staging very soon. We therefore question the statement that the level of functionality could be phased-in over time; users will need all the functionality from the beginning if there is to be enough capacity in the market to process all the applications at the correct time. An automated AE assessment tool will help small and micro employers minimise the time and effort they need to set up and operate a compliant scheme. 4. When launching the new AE tool it is essential that the HMRC and the tpr make it very clear that this new AE tool only helps with some of the payroll-related requirements for AE and will help employers to fulfil only certain of the employer s AE duties. Communication will be key as it will be all too easy for employers to believe that using the AE/payroll tool (alone) will make them AE compliant. RESPONSES TO SPECIFIC QUESTIONS Q1: Is there a need for tpr to develop a tool for BPT users? 5. Yes. We believe that circa 400,000 small employers use the BPT and in the interests of keeping the cost of complying with red tape to a minimum, they should not be required to buy payroll software, or other middleware, or buy in support from a bureau offering access to commercial software in order to be able to fulfil their AE duties. Q2: Is the proposed tool a proportionate response to the risk identified? 6. Yes, although it would make a lot more sense if this was part of BPT or at least accessible in one place rather than via two different government websites. Q3: What kind of functionality for the tool strikes the right balance between supporting BPT users with automatic enrolment compliance and at the same time maintaining an incentive for them to seek a better automatic enrolment solution from the marketplace? Please comment in particular on both the basic functionality proposed (see CD for detail) and the more advanced options (also outlined in CD) that could be considered 7. We query the premise behind this question. Why should small and micro business BPT users be incentivised to seek an AE solution from the marketplace? As we mention above, they should not be required to buy payroll software in order to be able to comply with their AE duties. 3

4 8. In our view, the tool should include the proposed basic functionality (ie worker assessment, contribution calculation, storing worker details and informing the employer what actions are needed for different categories of worker) and the more advanced options (eg, a data output function to allow the employer to upload/submit the results in an electronic file to the major AE pension providers in the micro employer market), plus we think the tool should go further, as follows. 9. The consultation states that the tool would not allow automated integration with the BPT (ie payroll data would be uploaded manually from BPT into the tool, with contributions data then uploaded into the BPT manually). However, in our view the functionality needs to be able to accept uploaded payroll data from BPT (via.csv and excel), and that contributions data should be capable of being downloaded back into BPT electronically/automatically (eg via a.csv file), to avoid the pointless manual transfer of data, and the errors that would likely result. 10. While we can understand that regulators do not wish to tread on the toes of commercial software providers, we would recommend that any development of AE software for the small and micro employer community should be consistent with existing offers. We therefore suggest that any AE tool should be able to pass data seamlessly to the BPT calculator, without the employer having to create.csv or similar intermediate files, and that the BPT calculator should equally pass data on earners and earnings seamlessly to the AE tool. HMRC has great problems with errors in RTI operation, so any development of BPT should be designed to minimise errors, rather than create more opportunities for them to be introduced. 11. The results of the assessment/calculation in each pay period should be displayed graphically, with action to be taken, ie, eligible so auto-enrol in a pension and take x% contributions. 12. We note that, where an employer chooses a definition of pensionable pay that is more than the statutory minimum, eg, from pound one rather than band earnings, it is proposed that the user will have manually to input the monetary value of pensionable earnings per member each cycle (whereas employers using band earnings would not need to do so). We are concerned that this could encourage employers to restrict contributions to the statutory minimum, and we therefore believe the tool should enable employers to input their pensionable pay criteria into the tool as standing data so that these amounts would not need to be manually input for each member in each period. 13. Regarding record keeping, the tool should provide the option of both printable and storable reports, with backup options similar to those offered in BPT. 14. The tool should incorporate postponement. The ability to postpone for up to three months will be of most significance to employers with seasonal/short term staff, many of those use BPT. 15. Whatever the level of functionality, the BPT, whilst officially for employers of 9 or fewer employees, can be used for up to 15 employees to cater for fluctuations during the year. We recommend that tpr s tool also works for up to 15 employees. Q4: How might the proposal affect the marketplace? 16. We do not believe this will commercially impact the marketplace. BPT users have managed to avoid buying payroll software, even with the introduction of RTI, so we believe they are unlikely to do so for AE (which brings all the risks of ongoing non-compliance that are outlined in the consultation). 17. Therefore, and in light of the proposed annual monitoring of the tool s impact on the market, we see no reason not to publish the tool (with the functionality we mention above). Q5: What more could be done to encourage BPT users to switch to a system which provides integrated support for automatic enrolment? 4

5 18. As we mention above, if the government decides to impose red tape on employers, it should mitigate the administrative burden, and in our view micro employers should be able to continue to use BPT, with added AE functionality. 5