The government has delayed a consultation on possible options for integrating the operation of income tax and National Insurance Contributions.
The consultation was originally due to start after the March Budget, following discussions with employers and other groups.
But due to the technical challenges involved in the move – and the potential disruption to employers’ payroll systems – the consultation will now not be held until after the summer, the Treasury has said.
“As many stakeholders have recognised, this is a complex issue with potentially significant implications for employers’ payroll operations,” it explained. “In parallel, the Government is looking in more detail at the interplays between options for integration and reforms to the welfare system."
Such considerations included the proposal announced during the Budget to create a single tier state pension, details of which are due to be set out in a forthcoming White Paper, the Treasury added. But the government still remained committed to exploring the potential for integration and would provide an update in the autumn, it said.
Tax experts have welcomed the plan to integrate income tax and NICs operations, but have likewise warned that the project will need to overcome some big technical and administrative challenges.
The plans coincide with a separate overhaul of the tax system. A planned move to Real Time Information for PAYE records will see employers send the taxman information about tax and national insurance deductions at the same time as they pay their employees rather than at the end of the financial year as is currently the case.
Real-time PAYE is due to kick in for big companies from April 2013. The information will be sent electronically.
