RTI and Bacs

RTI and Bacs

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I note from the new employers Bulletin that HMRC will require the employers BACS 'unique service number' so that HMRC can match the payments employees receive with the payroll date you report in real time.

I'm sure employees are gonna love HMRC almost access to their bank accounts!!

I don't think ever before have HMRC been told where which account wages payments go to.

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By neiltonks
25th Sep 2012 13:39

Myth!

HMRC will not be told about the bank account into which employees are paid under RTI. Neither, actually, will they be told the employer's BACS Service User Number.

What they will be able to do is verify that the net pay reported by the employer under RTI is the same as the amount actually paid to the employee via BACS.

It only applies when employers pay by direct BACS, i.e. when they have their own Service User Number. The (convoluted) way it works is basically:

The payroll system generates a string consisting of a "/ followed by three random characters for each employee payment to be made by BACS.

This random string is included in the BACS submission (in a previously-unused field)

The payroll system passes the random string, the source and destination sort codes (not account numbers) and the net pay into a hashing algorithm to generate a hash (which looks like a long string of random characters to the human eye).

When BACS process the payment, they pass the same values through the same hashing algorithm. The resulting hash and net pay value are passed to HMRC, who (all being well) match the hash with that in the RTI submission and compare the net pay values. However, if the net pay values on the BACS file and the RTI submission differ, the hash generated by BACS will be different to that on the RTI file and a mismatch will result.

The hashes themselves are non-reversable (i.e. HMRC can't reverse engineer the hash value back to its original components) and even if they could, they'd only get the sort codes and not the account numbers.

 

 

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By 0098087
25th Sep 2012 14:30

okay..thanks for the explanation

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
26th Sep 2012 13:22

More background info

Neil has provided an excellent summary of the situation, which was covered last year in our report HMRC hashes up RTI compromise.

Several other members, including several representatives from payroll software companies have been concerned about the Bacs agenda behind RTI and seem to have convinced HMRC for the time being that this is not the ideal vehicle for universal PAYE data exchange (and payments).

We'll be doing a lot more work around the subject in the weeks ahead, which you can follow on our RTI coverage index page.

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By Chris Wise
27th Sep 2012 10:11

Why?

Surely this information is only useful if the whole of the payroll is paid via BACS. New starters might get paid by cheque, what about small employers who dont use BACS, or any electronic transfer?

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Replying to stepurhan:
Tom McClelland
By TomMcClelland
27th Sep 2012 12:11

Direct BACS is 99.9% restricted to really large employers

Chris Wise wrote:

Surely this information is only useful if the whole of the payroll is paid via BACS. New starters might get paid by cheque, what about small employers who dont use BACS, or any electronic transfer?

 

Bingo. Large employers pay by direct BACS, but very few large employers will be signficant rule-breakers where it comes to employee PAYE/NI evasion so HMRC's ability to monitor whether or not reported payments = actual payments seems on the face of it to be an irrelevant distraction that doesn't solve any real world problem.

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Replying to stepurhan:
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By Healthpay
27th Sep 2012 12:15

HMRC are not in the real world

Chris Wise wrote:

Surely this information is only useful if the whole of the payroll is paid via BACS. New starters might get paid by cheque, what about small employers who dont use BACS, or any electronic transfer?

HMRC are not in the real world. In the early stages of proposing RTI they intended the employer to make gross payments via BACS, and HMRC would keep their bit and pass the rest on. Yes really!

Part of their unworldly belief is that the vast majority of pay is done by BACS, They didn't appreciate that many employers use online banking functions which, whilst they end up going via BACS, are not BACS from end to end, and many don't use any form of electronic banking.

So a few big employers will have to worry about this BACS hashing nonsense, the rest of us can just ignore it because we have no way of doing it!

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By AKing
27th Sep 2012 11:42

Weekly pay schedules

Let's hope that HMRC understand the tight deadlines that some SMEs are under for processing weekly payrolls.

I'd don't expect to see long periods of non-availability of service from HMRC with RTI coming in. (Along the lines of upgrades around April 1st to 7th every year and consequent loss of various online services at a crucial time).

 

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Tom McClelland
By TomMcClelland
27th Sep 2012 12:32

Faster Payments

And of course Faster Payments is electronic, increasingly popular, and doesn't even touch BACS. Anecdotally I've heard that some large employers who didn't want to be faffed with the hashing algorithm have simply switched to payment via Faster Payments.

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Replying to DMBAcc:
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By Mike Nicholas
27th Sep 2012 13:48

Faster payments - hashes and strings

All HMRC has to do to bring within scope of the hash and string requirements is vary the direction issued by the Board of Inland Revenue under the provisions of the PAYE regs and hey presto the faster paymenst service is subject to the requirement. The legislation is in place. The faster payment service records use the Bacs standard-18 file format and are routed via Bacs anyway. Similarly, for other HMRC-approved methods of electronic payment such as CHAPS.

 

 

 

 

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Replying to DKB Tiger:
Tom McClelland
By TomMcClelland
27th Sep 2012 14:20

Does Faster Payments go through BACS?

Mike Nicholas wrote:

... The faster payment service records use the Bacs standard-18 file format...

Only if you deal with fp directly. Some banks accept bulk fp requests through their own interfaces, which are usually just csv and don't have any spare fields or identifiers. Don't hold your breath waiting for banks to make changes to these secure and pervasive systems, however much HMRC were to huff and puff it would take years.

Mike Nicholas wrote:

The faster payment service records ... are routed via Bacs anyway.

That is news to me, and it isn't what the Faster Payments website or wikipedia says happens as far as I can see. But if you know different I'll freely concede that I'm not an electronic payments specialist and I'll be glad to have learned something new.

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Replying to Portia Nina Levin:
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By Mike Nicholas
27th Sep 2012 15:24

Fater paymenst

Tom

I agree the banking industry is something of a roadblock to an across the board implementation of the string in many other types of transaction.

As regards bulk submissions of faster payments records, try

http://www.fasterpayments.org.uk/faster_payments/how_to_use_the_faster_payments_service_new/-/page/1947/

and also see

http://www.albany.co.uk/knowledge-centre/faster-payments-service/

There is it seems possibly a difference between let's say individual faster payments transactions and those submitted in bulk.

I also found this in the Bacs 2012 annual report:

"As all payment methods will need to accommodate the data requirement, this new solution will be scheme agnostic. [my emphasis] ..."

This is also noteworthy from http://www.vocalink.com/infrastructure/faster-payments-service/corporates.aspx

"Corporates

Businesses have two options for making faster payments, either by using a corporate banking product which will follow the process of a single immediate payment where the payment is sent and received immediately. You will need to contact your bank to confirm whether this is an option provided by them.

The second option is to utilise the Direct Corporate Access (DCA) module of faster payments. Under normal circumstances this module allows you to submit payment files and is processed within 2 hours. You will need a software upgrade to the current BACSTEL-IP software and will therefore need to contact your software solution provider."

 

 

 

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