PAYE in real time – post implementation review

Inaccurate processing and poor IT specification

The main problem is inaccurate processing by HMRC of employer-submitted RTI data, leading to HMRC’s records containing incorrect figures for liabilities and payments which result in many man hours spent unproductively by HMRC, employers and employees, agents and PAYE bureaux in chasing apparent underpayments, resolving disputed charges and unexplained entries on HMRC’s employer PAYE accounts, and correcting code numbers.

ICAEW Tax Faculty reported this in April 2016 when responding both face-to-face and in writing (ICAEW REP 163/16) to HMRC’s invitation to contribute to its post implementation review of PAYE real time information (RTI).

In our response we explained the most important concerns of our members and the impacts, recommended operational improvements that we feel HMRC could usefully consider and forecast anticipated benefits if HMRC works with its customers to deliver solutions

As well as inaccurate processing by HMRC of data submitted by employers and payroll agents, dispute resolution takes far too long, exacerbated by poor communication from HMRC regarding the progress of ‘disputes’ and the cause and the solution of issues. Refunds to employers of overpayments take far too long to be agreed and be repaid – more than a year is not uncommon. Employees changing jobs and employers changing software providers leads to duplication of figures in HMRC’s records and apparent underpayments of PAYE.

Some errors appear to arise from poor IT specification. For example, employee leaving dates cannot be notified to HMRC on the full payment submission without financial data, resulting in code numbers being issued as if employments were concurrent rather than consecutive, and earlier year updates (EYU) have to show the amounts by which HMRC’s figures should be changed rather than the correct figures, involving employers in having to find out what figures HMRC has on its records, and employers are reluctant to use their own payroll software to submit EYU lest it corrupts their own (correct) figures. Not all HMRC staff can even see the same figures as one another on HMRC’s employer PAYE accounts, and (at the time of the response) payroll agents have no access to HMRC’s PAYE payment and liability records at all (unless they are eligible to participate in the beta trials).

With 60 million employee and pensioner records, even a 99% accuracy rate still leaves 600,000 incorrect records.

We believe that if HMRC worked with customers to deliver solutions, then there would be a substantial reduction in costs for HMRC, employers and employees, and the elimination of errors in HMRC’s records would have beneficial effects on the integrity of the tax, NIC and state pension regimes, and increase the likelihood of successful rollouts of universal credit and making tax digital.

In our post implementation review response, we also included verbatim comments received from members in the previous two months. If you would like to provide us with your current experiences of where things are going well or not so well, do please make a posting on our forum post published today, or email details with PAYE scheme name and HMRC reference number to so we can send it to HMRC as an actual example.

Over the Summer, the Government announced that making tax digital is a priority and has published several consultation documents including one on HMRC making better use of third party information for which the response deadline of 7 November is fast approaching.  If you would like to contribute to our response, please post a comment on our MTD news item Making Tax Digital – Better use of third party information  or email as soon as possible.