Radical changes to the way employers and HMRC handle payslip data, due to take place next year, could pose problems for local employers, according to tax experts at PwC in the Midlands.  

From October 2013, all employers must use the new system, which will see payslip data on tax, NIC and other deductions transmitted to HMRC at the time employees are paid, rather than once a year. P45s and many other such forms will become a thing of the past. 

PwC welcomes the modernisation of the current PAYE model, which has been in place since the 1940s. In the long term, this should also help prevent tax code errors. However, the tight timescale for the changes could cause issues for some employers and glitches are likely when the new system is introduced. 

Stuart Wallace, Head of Tax at PwC in the Midlands, said: 

"The modernisation of PAYE is long overdue. The system dates back to the end of the Second World War when most people had one job, often for life, and were paid in cash.  Given the complex working patterns of today, it's surprising it's coped as it has for so long.

"However, the scale and timing for change could pose problems. Real Time Information will see employers gathering and transmitting considerable volumes of data, beyond what is already on the payroll system. Timescales are incredibly tight for getting the processes in place across the many parties involved, let alone dealing with training and communications. All this will be happening when many employers are grappling with the challenges of automatic pension scheme enrolment.   

"There is also likely to be a level of confusion among employees as they get used to 'leavers statements', which will replace P45s."