Treasury 'call for evidence' on merging National Insurance Contributions and Income Tax

September 14, 2011 1:35 PM



In his Budget 2011 speech the Chancellor signalled his intention to look into the operation of Income Tax and National Insurance Contributions. HMRC and the Treasury launched a “Call for Evidence” which expires this Monday, 19th September. The consultation includes 14 questions which have been copied below. The first three are of general interest and are aimed at everyone, and the others are more technical, aimed at HR professionals and employers.



If you want to respond so policy-makers in Government know your thoughts about the complexity and burdens of running separate systems of taxing income, please email incometaxnics.simplification@hmtreasury.gsi.gov.uk with your comments. We have reproduced the questions below and, for the general interest questions, provided brief suggestions.

General interest questions:


1. The Government believes that integrating the operation of income tax and NICs may have the potential to remove distortions, reduce burdens on business and improve fairness. Do you have any comments on these objectives?
You might want to mention transparency, and suggest that this objective, along with the others listed, could be much more effectively achieved by considering employers’ National Insurance Contributions (NICs) as well as employees’ contributions.

2. Of the differences between income tax and NICs listed in Table 1.A (or any others that you consider important) which do you see as the most significant in terms of their impact on: a economic distortions; b burdens on employers; c fairness?
Again, employers’ NICs impact upon these criteria so you may want to mention them here, too.

3. What do you think are the most important steps that could be taken to reduce the effects on: a economic distortions; b burdens on employers; c fairness?
Would some degree of tinkering with the existing, complicated system be best or should the Government be bolder and abolish NICs altogether and adjust Income Tax accordingly?

Employers and Payroll Professionals:
4. Under the current system, how much staff time and/or other resource is required to carry out income tax and NICs processes? Please give a score on a scale from 1 to 5 where 1 is only a small amount of time/resource and 5 is a great deal of time/resource for each of the following:
a) Familiarisation: understanding HMRC’s requirements, legislation and guidance.
b) Retrieval of information: obtaining the information required to run a PAYE payroll.
c) Record keeping: maintaining the records needed for income and NICs purposes e.g. keeping copies of returns/letters where necessary.
d) Calculation: calculating and checking income tax and NICs due (including in-year and end of year processes).
e) Provision of information to HMRC: reporting of information to HMRC e.g. P45s for new employees.
f) Provision of information to employees: reporting and providing information to employees e.g. year end P60s.
g) Payment of liabilities: paying income tax and NICs to HMRC.
5. Which aspects of the current income tax and NICs process work well for your business?
6. Do you carry out income tax and NICs obligations together? Are there any elements you carry out separately?
7. What effect do differences between income tax and NICs have on wider payroll processes such as expenses and benefits, statutory payments and student loans deductions?
8. Which of the differences between income tax and NICs are dealt with largely automatically by payroll software and which require significant manual working? Where manual working is required how straight forward is this?
9. Are there particular issues that occur in the calculation of income tax and NICs?
10. How often is it necessary to correct income tax or NICs calculations and which are the most time consuming to correct?
11. Do you have any comments about difficulties in designing or using software resulting from the differences identified in Table 1.A (or any others that you consider important)?
12. What do you see as the main differences between income tax and NICs in relation to employees you have who work internationally?
13. Which of the differences outlined in question 12 are dealt with largely automatically by payroll software and which require significant manual working? Where manual working is required how straightforward is this?
14 Do you have any views on how the introduction of Real Time Information (RTI) may affect the cost and benefits of income tax and NICs integration?



In his Budget 2011 speech the Chancellor signalled his intention to look into the operation of Income Tax and National Insurance Contributions. HMRC and the Treasury launched a “Call for Evidence” which expires this Monday, 19th September. The consultation includes 14 questions which have been copied below. The first three are of general interest and are aimed at everyone, and the others are more technical, aimed at HR professionals and employers.



If you want to respond so policy-makers in Government know your thoughts about the complexity and burdens of running separate systems of taxing income, please email incometaxnics.simplification@hmtreasury.gsi.gov.uk with your comments. We have reproduced the questions below and, for the general interest questions, provided brief suggestions.

General interest questions:


1. The Government believes that integrating the operation of income tax and NICs may have the potential to remove distortions, reduce burdens on business and improve fairness. Do you have any comments on these objectives?
You might want to mention transparency, and suggest that this objective, along with the others listed, could be much more effectively achieved by considering employers’ National Insurance Contributions (NICs) as well as employees’ contributions.

2. Of the differences between income tax and NICs listed in Table 1.A (or any others that you consider important) which do you see as the most significant in terms of their impact on: a economic distortions; b burdens on employers; c fairness?
Again, employers’ NICs impact upon these criteria so you may want to mention them here, too.

3. What do you think are the most important steps that could be taken to reduce the effects on: a economic distortions; b burdens on employers; c fairness?
Would some degree of tinkering with the existing, complicated system be best or should the Government be bolder and abolish NICs altogether and adjust Income Tax accordingly?

Employers and Payroll Professionals:
4. Under the current system, how much staff time and/or other resource is required to carry out income tax and NICs processes? Please give a score on a scale from 1 to 5 where 1 is only a small amount of time/resource and 5 is a great deal of time/resource for each of the following:
a) Familiarisation: understanding HMRC’s requirements, legislation and guidance.
b) Retrieval of information: obtaining the information required to run a PAYE payroll.
c) Record keeping: maintaining the records needed for income and NICs purposes e.g. keeping copies of returns/letters where necessary.
d) Calculation: calculating and checking income tax and NICs due (including in-year and end of year processes).
e) Provision of information to HMRC: reporting of information to HMRC e.g. P45s for new employees.
f) Provision of information to employees: reporting and providing information to employees e.g. year end P60s.
g) Payment of liabilities: paying income tax and NICs to HMRC.
5. Which aspects of the current income tax and NICs process work well for your business?
6. Do you carry out income tax and NICs obligations together? Are there any elements you carry out separately?
7. What effect do differences between income tax and NICs have on wider payroll processes such as expenses and benefits, statutory payments and student loans deductions?
8. Which of the differences between income tax and NICs are dealt with largely automatically by payroll software and which require significant manual working? Where manual working is required how straight forward is this?
9. Are there particular issues that occur in the calculation of income tax and NICs?
10. How often is it necessary to correct income tax or NICs calculations and which are the most time consuming to correct?
11. Do you have any comments about difficulties in designing or using software resulting from the differences identified in Table 1.A (or any others that you consider important)?
12. What do you see as the main differences between income tax and NICs in relation to employees you have who work internationally?
13. Which of the differences outlined in question 12 are dealt with largely automatically by payroll software and which require significant manual working? Where manual working is required how straightforward is this?
14 Do you have any views on how the introduction of Real Time Information (RTI) may affect the cost and benefits of income tax and NICs integration?

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