PAYE crisis watch: new concession on interest

HMRC have created a further concession in the light of the PAYE crisis. No interest will be charged on outstanding balances of £2,000 or more.

This new concession will apply, according to HMRC's Dame Lesley Strathie to all outstanding balances of PAYE that have come to light with HMRC's new PAYE computer. It will also apply to so called "legacy balances" these are past years which have yet to be reconciled back to 06/07.

The concession will not affect overpayment interest this will continue to be paid by HMRC.

Stathie appeared with her colleagues, Dave Hartnett and Bernadette Kelly this morning in front of the Treasury Select Committee. The Committee is charged with reviewing the PAYE crisis, described by its Chairman Andrew Tyrie as "a serious cock-up"

Following the interview, the Committee will now consider whether there should be a review of HMRC's operations, and also whether PAYE should be operated on a real time basis.

The argument for real time processing may well be more attractive to MPs if they appreciate that although there will be an extra cost in adding another 34 million individuals into the tax system, the benefit is that in other countries which process tax in real time, also set deductions at a higher level. Therefore the carrot in terms of tax compliance is that you overpay tax each year and so must file a return each year to agree your refund.

Real time is not so appealing if you have multiple jobs, and so it will not be popular with low income part-timers, or perhaps with some MPs themselves!