RTI pilot takes off, says HMRC

After recent controversies surrounding the PAYE real time information (RTI) initiative, HMRC officials have launched a charm offensive to emphasise how well the project’s pilot scheme is going.

Leading the charge is exchequer secretary to the Treasury David Gauke. On Tuesday (17 July) he was in London alongside DWP minister Lord Freud to affirm that RTI and the universal credit scheme it will feed data into were both on track and on budget.

Today (18 July), Gauke was in Solihull to witness the first RTI filing from the payroll professional body CIPP.

The flak has been flying from a number of directions. On AccountingWEB, for example, members have been questioning how RTI will work for one-man bands. Then the All Party Parliamentary Tax Group published a report calling for RTI to be delayed so that it could be extended to cope with centralised deductions. That proposal got very short shrift from the ministers concerned.

Lurking in the background, meanwhile, is the prospect of a parallel reporting system for self-employed people who also want to claim universal credit. While that may complicate life for sole traders, it’s a tangle that the DWP will need to sort out once it has completed its summer consultation exercise.

“We are very much on track for delivering every employer by 2013, in time for the roll out of universal credit,” said Gauke.

The full article visible to logged-in members of AccountingWEB.co.uk also covers:

  • How RTI works
  • Pilot scheme progress report

  • Friction points

More RTI resources

 

Continued...

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Comments

RTI

Peter Tucker | | Permalink

Worth noting that to date RTI is passing electronic PAYE data to HMRC, something which almost all Employers have been doing for the past few years. The only way to confirm RTI is working is for HMRC to actually and correctly match the electronic information to the appropriate Individual.
Interesting to note that after spending £380 million plus on a new computer, HMRC were unable to match 3% ( that is some 2 million forms ) of Year End details of pay, tax etc.
The oft mentioned problem of employers supplying Dirty Data was discussed at a recent meeting of the Public Accounts Committee. Richard Bacon MP asked how dirty data could exist in HMRC systems when HMRC only accepts electronic PAYE data which has passed HMRC's own validation process. There was no real answer to this simple question from HMRC senior managers.
Might be important to ensure HMRC's internal systems are successful before claiming the technology is working well?

Umm ..

Trevor Scott | | Permalink

When you state

“After recent controversies surrounding the PAYE real time information (RTI) initiative, HMRC officials have launched a charm offensive to emphasise how well the project’s pilot scheme is going.”

Do you actually mean that after the deficiencies of RTI, together with deficiencies of said scheme, had been highlighted (by the Public Accounts Committee etc) the Treasury and HMRC launched a propaganda campaign in an attempt to cover-up their mismanagement and failings?   

 

HMRC

RICHARDBIBBY | | Permalink

HMRC's computer systems are so technologically advanced that they have held up a client's tax refund for six months while they await a reply from the Employer for a copy of the P45 (my client having lost her copy).

In another case HMRC have demanded that my client provides a P45 or P60 (another client who had lost his copy) so that they can verify their data to resolve their tax investigation. I had foolishly relied on a letter previously sent by HMRC to me so that I could prepare my client's Tax Return and it now appears that the letter provided by HMRC and information shown on the Employer Coding Notice was complete rubbish.

I sometimes wonder what HMRC do with all this data they collect but are reluctant to share?

More Revenue propaganda I think but I am glad to hear that it will reduce "requirements" on Employers!

 

Wait & see

sherodwilliams | | Permalink

  1300 in the pilot by October 2012 rising to 250,000 by April 2013.

  This sounds like the optimism of G4S in terms of Olympic Games  Security.

  The proof of the pudding so to speak will no doubt be in front of a Select Committee in the fullness of time when the usual suspects will be rolling out the usual lame excuses as to why it did'nt quite work out as intended.

  HMRC currently have  validation issues on much simpler & longstanding processes and dirty data projections should not be considered as small percentages but large numbers in terms of the grief & hassle it will cause to employers , are trying to get UKplc back on track rather than spending time sorting out issues for the benefit of HMRC

What about pseudo-benefits?    2 thanks

rkdia | | Permalink

Having just done P11D's reporting an assortment of reimbursed business expenses and company credit card use for one man companies , all of which will be claimed eventually as W,E&N I am now getting the usual spate of erroneous PAYE codes including these as deductions.  Impressed by HMRC's efficiency this year (months earlier than previously) but am very worried about how RTI will cope where, as an extreme example, I have a director who is now on a K14890(!) code due to his credit card use.  None of this is taxable but even if it is amended directly rather than waiting for his Tax Return it could take a month to take effect.  In the real world the code change would be pragmatically ignored pending amendment but under RTI the employer would presumably be expected to deduct and pay over extra tax of up to £6k this month, which, even if it gets it back next month, is unrealistic for their cash flow.

The concept of taxing expenses regardless of any personal benefit until a claim is received is archaic and contrary to the principals of self assessment prevalent in all other areas of tax so needs thorough review anyway.  Until it is I can't see RTI working well for small companies who don't have the segreation of duties to qualify for dispensations.

 

 

carnmores's picture

all these lies do my head in

carnmores | | Permalink

everbody knows that it will be a total **** up

handymann7088's picture

What about pseudo-benefits?

handymann7088 | | Permalink

what about a dispensation?

TomMcClelland's picture

The reaction from employers

TomMcClelland | | Permalink
  • The reaction from employers taking part in the pilot scheme was very good, the minister added: “As payments are made through payroll, the information goes to HMRC automatically, so it does reduce requirements on businesses.”

Um, run that by me again. How does asking every employer in the land to do something extra every time they pay an employee amount to "reducing requirements on businesses" ?

In the world of Government Ministers and Sir Humphrey black is white, and 6 impossible things can be believed before breakfast.

Like blood out of a stone

Ken Howard | | Permalink

handymann7088 wrote:

what about a dispensation?

Getting a dispensation for a one-man company continues to be akin to getting blood out of a stone.

Yes, we hear of HMRC's apparent willingness to grant dispensations, but the reality is completely different.

Every year or so, I try to get a dispensation for a random client just to see if they really are being more accommodating, but they're not at all.

Still get the same kind of letter back asking for humingous amounts of paperwork to justify them giving a dispensation and then, as usual, always falling at the final hurdle when there isn't anyone to counter-check the claim before it's paid.

Locutus's picture

Eject! Eject!    1 thanks

Locutus | | Permalink

We're going to crash!

But seriously, I think RTI will probably work for large companies, but for the smaller ones it will be yet another onerous burden.

I despair with the whole P11D reporting of non-taxable expenses issue (which always generates wrong PAYE codes). This is such a simple thing that HMRC could fix very easily - just change the rules so that any expenses incurred by a director / employee wholly, exclusively and necessarily in performance of their duties do not need to be reported. End of. No need for the dispensation nonsense.

It's this sort of time wasting that really gets on my nerves.

TomMcClelland's picture

Pilot emplyers seem skewed to "large". Hopefully that will chang

TomMcClelland | | Permalink

0103953 wrote:
We're going to crash! But seriously, I think RTI will probably work for large companies, but for the smaller ones it will be yet another onerous burden.

It is interesting to note from the figures supplied that the *average* number of employees in the businesses so far in the pilot is 3400!

Since it is a fair guess that above 99% of UK employers employ fewer than 10 people the sample so far is likely to be almost entirely unrepresentative of most businesses that will have to file. The sample is skewed towards the same large businesses that most of the thinking and planning from HMRC's side is directed at. The kind of large organisations that understand BACS, have IT departments that understand polled internet conversations, already have extremely formal payroll processes in place are clearly not going to struggle greatly with RTI.

Come on, let's leave the hyperbole to HMRC

Healthpay | | Permalink

I have one client on RTI with 8 employees. The additional monthly workload is two mouse clicks. Against that they lose a P35/P11/P14 procedure. I know which I prefer!

However there are two issues that haven't been mentioned as far as I can see.

Firstly in some cases it will temporarily reduce the accuracy of tax collected. For example I had an employee who gave me a P46, Box C ticked. I filed this electronically, and next morning got a coding of 500TM1 back. So under current rules their first pay run will use 500TM1, under RTI it will use BRM1. and because it is all month1 there will be no automatic correction when the 500TM1 code arrives. Which is more accurate?

And secondly, RTI is going to add a lot of work to employers, nothing to do with processing of tax and NI, but because of this universal Tax Credit holy grail.

Employers will have to report what weekly hours band the employee is in. Not actual hours, but "up to 15.99, 16-29.99, 30 hours or more, or Other". That is information that isn't kept now in their payroll system, and is of no practical use in processing pay. I shall use "Other" but how long will that be acceptable? Plus they will have to report on unpaid leave and strike days, which whilst it has an impact on pay is new work to most.

RTI is fine for most employers. Universal Tax Credit isn't.

 

 

Charity

Olive-Gardiner | | Permalink

Small charity - one employee when funding permits. Easily managed through HMRC basic tools. What will RTI mean in this case?

Basic Tools

Healthpay | | Permalink

Will support RTI submissions before long.

TomMcClelland's picture

Easier every period than once a year?

TomMcClelland | | Permalink

woodworm wrote:

I have one client on RTI with 8 employees. The additional monthly workload is two mouse clicks. Against that they lose a P35/P11/P14 procedure. I know which I prefer!

In my opinion three clicks a year for P35/P14 is preferable to two clicks per pay period under RTI. Most of our clients complete the entire P35 process in a few minutes a year as long as the Gateway is up. I guess from your comment that you don't see it that way.

My concerns revolve around what happens when everything doesn't work perfectly or when employers have (lack of) procedures that don't fit neatly into a formal operational model of a "payroll cycle".Clients do things like switch systems mid-year, parallel runs to check performance against legacy systems when switching supplier, windbacks or backup restores to correct errors, etc. All of these things have added complication once RTI is in the frame.

@tom ..entirely agree...

justsotax | | Permalink

these new systems are fine as long as there are no 'funnies'....wait for that first problem and see how easy it is to resolve....

RTI    1 thanks

David Gordon FCCA | | Permalink

The real problem is that as a group, accountancy practices are not prepared to take up the cudgels on behalf of smaller units. My experience is that small practices will not band together to tackle these issues head on. SPA notwithstanding, As regards the ACCA, members in small practices are now very much a minority issue.

What I would love to know is how many one or two person payrolls are registered with HMRC. Also,  3-5 person payrolls, and how many of these are in the survey or trial run.Also, how many of these are registered as being represented by agents for PAYE.and how many of those agents are in the trial run. 

I would hazard a guess that if this was a test of a proposed new drug, the results would be thrown out by peer reviewers, simply because of a skewed sample.

HMRC are and always have been constructively dishonest over this, and similar matters in the past.

If HMRC was being honest, on introduction of such a scheme it would provide software for the taxpayer and his agent to use. HMRC will not do this on the grounds that it is too expensive and complicated to so provide software. Which sort of proves the point

We are already being bombarded by suppliers offering training courses costing anything from £100 upwards (plus attendance and fee time lost costs) for dealing with this monster. The numerous suppliers clearly believe RTI (PAYE) will be, in plain Essex-speak, "A nice little earner".,  

RTI part 99a

David Gordon FCCA | | Permalink

The scientific truth is HMRC is an abstract concept. Similar to any large organsation it is controlled by, probably, half a dozen executives.

There is a well proven scientific method of testing these things.

You do not spend eye-watering sums of money on mega-electronic Towers of Babel.

You go to your programmer provide him with details of the concept, and simply ask, provide me with a program or suite of programs that Joe and Jane taxpayer can - I mean "Can" not "May" -use to provide this information within an acceptable  £ /Time cost..

If the programmer is unable to do that within say, a generous budget of

£500k - You know the big idea is a lemon.

T'aint rocket science. That is how toy manufacturers, sweetie makers, and food companies test their ideas.

Look after the pennies and the pounds will look after themselves.

 

 

?

Trevor Scott | | Permalink

David Gordon FCCA wrote:

The scientific truth is HMRC is an abstract concept. .....

Please explain.

Most employers have to do nothing more

ringi | | Permalink

TomMcClelland wrote:

Um, run that by me again. How does asking every employer in the land to do something extra every time they pay an employee amount to "reducing requirements on businesses" ?

If an employer is using payroll software and uploads a becs data file to their bank, the software will add the hashcode to the becs file and as the software has already been setup with the details to send P45 etc on-line to HMRC, it can send the monthly returns without the employer having to do any more work.

The problem is small employers that enter the payments into their internet banking by hand and don’t use an integrated payroll system.

So when will some banks start to offer a free payroll system that is part of the business bank account accessed var the some web site?   Then the employer could just enter the “wage” in one place and the correct payments could be made along with the correct returns to HMRC.

TomMcClelland's picture

By magic?

TomMcClelland | | Permalink

ringi wrote:

TomMcClelland wrote:

Um, run that by me again. How does asking every employer in the land to do something extra every time they pay an employee amount to "reducing requirements on businesses" ?

If an employer is using payroll software and uploads a becs data file to their bank, the software will add the hashcode to the becs file and as the software has already been setup with the details to send P45 etc on-line to HMRC, it can send the monthly returns without the employer having to do any more work.

The problem is small employers that enter the payments into their internet banking by hand and don’t use an integrated payroll system.

So when will some banks start to offer a free payroll system that is part of the business bank account accessed var the some web site?   Then the employer could just enter the “wage” in one place and the correct payments could be made along with the correct returns to HMRC.

Banks will start to offer a free payroll system right after they offer free merchanting systems, free accounting systems, free VAT systems, free CT systems, and so on.

The highlighted text is where HMRC's original analysis went wrong. (though your later text was a partial correction).

Above 98% of small employers (and I'd guess above 95% of ALL employers) don't pay their employees by direct BACS or a BACS bureau. Regardless of HMRC propaganda to the contrary (their original claims on this score were risible). We have 10,000 employers currently using our software. I doubt that 5 of them are using our software's BACS file generator. A few hundred use our software's internet banking file generators, but....

Internet banking is currently no help in this context, since even if you do use an integrated payroll system to generate an internet banking file (as perhaps 10% of all small employers do) it won't contain a space for the hash code. For all UK banks to change their internet banking file formats to handle this would be a very big deal. These are massive secure systems and banks will only alter them with the greatest reluctance and at a very slow pace. Just look at BACS itself as a prime example; a data format that was designed with punched cards in mind!

Some small employers pay employees individually using internet banking, (because they haven't purchased a service from their bank that allows payment file upload (such services aren't usually free, and the cost of them can be quite significant for small employers), or indeed when you have one or two employees it is actually *easier* to just enter the payments directly than it is to generate a banking file and import it into banking software. Or they write a cheque for their employees, or they give them cash, or they print a secure cheque. All of those methods are vastly more common than BACS.

BACS may account for a high percentage of employee payments, because giant employers nearly all use BACS (though anecdotally some are shifting to Faster Payments precisely to avoid direct HMRC oversight of their employee payments). But for ordinary employers it is an expensive, unobtainable irrelevance.

I'm still missing how making all employers do something that is essentially very similar to the current year-end P35/P14 requirement every time they pay an employee can be described as "reducing the burden on employers".

“soft landing”

ringi | | Permalink

So the main issue is including the hash code in the bank transfer data, so if a “soft landing” required the monthly return, but accepted that the hash code would not be included in payments to start with, would remove a lot of the problems?

TomMcClelland's picture

Hash code isn't the issue

TomMcClelland | | Permalink

The hash code isn't the issue for Britain's million+ small employers, since they can't supply it to HMRC (which HMRC accepts). The issue is the requirement to do a return (not monthly) every time you pay employee(s), before they get the money. The return may be semi-automatic in the payroll software, and software suppliers will all strive to make it as low impact as possible in their own interest. Just as they currently try to make P35/P14 as easy as possible. But low impact is not zero impact, and problems will arise in special cases (parallel runs, software supplier changes, late notified changes, rewinds, reversals, restore payroll data to backup after system failure, redo year's payroll after theft of PC etc). Most small employers don't operate a highly formal payroll cycle as large employers do. And they won't understand things like HMRC's site being "down" for scheduled maintenance from time to time and therefore not responding to submissions at those times.

As I say, RTI is not "reducing the burden on employers", and it is dishonest nonsense to claim that it is.

Practicalities    1 thanks

Cloudcounter | | Permalink

It's one thing running a monthly payroll for a large company, but quite different running weekly payrolls.  What do people do, or intend to do, about getting client permission to file with HMRC?  At present we send the employer (post or email) a copy of the P35 and P60s and ask for approval - either on paper or electronically.

Do people intend to get authorisation from the client every week?  if not, where do you stand if something is filed which is incorrect?  Many errors don't come to light until the employee sees the money - clearly after they've been paid. Or you find that there was a new starter they didn't tell you about, so they were paid in cash.

Saying that it's only two clicks is all very well, but that's 104 clicks for a weekly payroll, plus 52 authorisations.  Tell me how that's easier.

Or will it be a case of "we'll file it anyway - tell us if it's wrong after the event"

I don't know the right answer - what do others think?

Killing the smallest businesses

smallbeancounter | | Permalink

I remember when the smallest businesses, like the family farm I grew up on with 3 wage earners, could do all the payroll work in house on paper easily and quickly and no errors. Now even tiny businesses have to pay someone to do payroll because who except a specialist could possibly understand all these systems?

If you want to know why the country faces an uncertain future read this report: http://www.tullettprebon.com/Documents/strategyinsights/Tim_Morgan_Report_007.pdf and consider the fact that nothing is being done to remove the structural barriers to growth, and every change seems to make life tougher for small employers. If a tougher life for small employers translates into fewer small employers then that probably means fewer big employers in the future, and reduced prospects for growth.

RTI

Mike Nicholas | | Permalink

Just to correct a possible misunderstanding...from April 2013 employers and pension providers will be required to make a RTI submission each time an employee or pension beneficiary is paid. So, it will not be just a case of reporting when the weekly (or monthly, etc) payroll is run. Whether this will change before April we'll have to see.

 

A few weeks ago HMRC released the RTI computer specification for the tax year 2013/14. Unsurprisingly there are new data requirements, and in particular a new reporting facility for earlier year updates (EYU). Some payroll providers may integrate the EYU into the software but others might not.

Amongst the new data items are a COTAX reference number and SA UTR. These should help HMRC identify the employer.

There is also a new data item to be completed with 'Yes' when the employee's pay in the pay period is reduced because of unpaid absence. I expect this will be used for Universal Credits.

RTI poses challenges for everyone.