PAYE RTI post implementation review published

HMRC has published its post implementation review (PIR) of the PAYE real time information (RTI) programme. While some time has passed since Spring 2016 when the Tax Faculty presented our evidence both oral and written (ICAEW REP 163/16) to HMRC’s review team, much of what we said then still applies and we are delighted that HMRC has published its report. 

We welcome the candour of the report and the focus on lessons to learn, for example the need for all versions of HMRC’s records to be consistent and for agents to be able to view them, and the acknowledgement of the doubts expressed over burdens/savings. There are lessons for Making Tax Digital (MTD) and it is good to see them identified here. 

The object of the PIR was to address the following: 

  • Did the programme achieve what it set out to do?
  • How is RTI performing more than three years after it started?
  • What needs to be done to improve performance and make best use of this strategic asset for government?

 

Did the programme achieve what it set out to do?

The report says that: 

  • The evidence is that the programme did achieve what it set out to do and the changes were positive. Considering the scale (1.5 million employers) and pace, the introduction of RTI for many, but not all, businesses went relatively smoothly.
  • There have been cost savings, for example of £64m for HMRC and £292 per annum for employers, along with a one-off PAYE cash flow benefit to the exchequer of £81m and tax credit savings of £672m, as well as additional costs, including £292m one-off and transitional costs for employers and £307m for HMRC to implement RTI.

Tax Faculty comment: We presume that it is only the year one cost saving that was negated by transitional costs, but remain sceptical over whether there really are ongoing cost savings. We should welcome clarification of how the figures have been arrived at.

 

How is RTI performing more than three years after it started?

The report says that: 

  • RTI is performing well with HMRC processing RTI for over 40 million employees and occupational pensioners. A proportionately small number of data issues and mismatches between HMRC and employer records continue to be time consuming and potentially costly to resolve for employers, agents and HMRC. This is exacerbated by the delay in providing a real time view of RTI data for employers and agents to check against their own records, and the process for amending submissions.
  • The consensus remains positive the that the changes were necessary and have modernised PAYE practices and reduced error and fraud. HMRC accepts the lessons to be learned on consultation, communication and implementation.

Tax Faculty comment: We are not convinced that RTI is working as smoothly as this summary suggests. In HMRC’s records there are still too many instances of duplicated employments (especially following employer payroll software provider changes or business restructurings) and incorrectly recorded liabilities and payments, which continue to lead to inappropriate (and sometimes distressing) contact from HMRC’s ‘field force’ (ie in-house debt collectors) which makes employers who use agents think that their agent has done something wrong. 

Also it should be borne in mind that the large absolute number of PAYE schemes and individual employee records means that expressing error rates in percentage terms can overshadow the fact that a small percentage of errors impacts a huge number of individual records.

 

What needs to be done to improve performance and make best use of this strategic asset for government?

The report says that: 

  • There is still much to do to ensure that employers find it easier to understand and comply with their obligations.
  • Communications are not reaching all employers and some small employers are still struggling. HMRC has set up a team to think more innovatively about how to reach smaller employers and provide them with the clarity that they need and involve external experts and employers earlier when changing guidance or processes.
  • Regarding data quality and mismatches, HMRC proposes to support employers to apply best practice and offer ‘once and done’ support to employers and agents, and, to enable employers and agents to view HMRC’s records and more easily update current or past years, is prioritising development of digital solutions to provide a real time view of liabilities and payments data and to facilitate amendments and reporting of information currently submitted in EPS.
  • To exploit better the information embedded in RTI, HMRC is working towards ensuring that more tax codes are correct in year so fewer individuals end the tax year owing tax or being owed a repayment, pre-populating RTI data in personal tax accounts and self assessment, and improving the student loan repayment process.

Tax Faculty comment: We welcome the recognition of shortcomings but are concerned that some of the proposed solutions outlined in the report will not resolve underlying problems even if they are delivered by the target date of 31 March 2019. 

For example, we have long expressed the view that the earlier year update (EYU) should be changed so that users input what the figures should be rather than by how much the figures in HMRC’s records, which are not necessarily known by employers and where available may be wrong, should be changed. HMRC told us in late 2014 that EYU redesign was being worked on, so we are disappointed to read in the PIR report (in Appendix B) that the latest change proposal is limited to making HMRC’s figures more easily accessible. 

What do you think of how RTI is working now and of the PIR? Please post a comment below.

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