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PAYE RTI: The Information Gap!

28th Jun 2013
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There is a widespread information gap in PAYE RTI reporting which has been largely overlooked until now. Accountants and payroll service providers who have responsibility for submitting PAYE reporting in real time, on behalf of clients, cannot see the figures they have submitted online, or verify if they have been reconciled to their clients’ PAYE accounts successfully.

It’s easy to understand why this issue is only now coming to the fore. Despite the well-documented submission issues, the introduction of RTI reporting via the Government Gateway has largely been successful, thanks to the efforts of accountancy professionals. The natural reaction to the successful submission of the first returns for all client payrolls over the Government Gateway, accompanied by a submission receipt, was relief. Job done! And that is exactly right because this is all the agent can do.

HMRC’s design of the Gateway’s PAYE RTI submission process, in particular the security permissions granted to Gateway users, very clearly delineates between agents and employers. Following submission and receipt of a client’s FPS and EPS returns by the Gateway, the agent’s ID security permissions restrict them from doing anything else: the Gateway agent ID does not allow access to the client PAYE account they have just submitted a return for.

As an accountant put it recently on the ICAEW blog site: “So what are we authorised to discuss if not figures [we’ve reported]?” Access to a PAYE scheme account is reserved by HMRC exclusively for the employer, so some firms and agents submit RTI using ‘client’ Gateway IDs to get around this problem. However, this practice appears to be the exception.

Any Gateway user ID issued to the client includes the permissions to view their PAYE account, provided they have subscribed to Employer PAYE services online; either by subscribing to Employer PAYE services from the Gateway or HMRC secure sites or by setting up an HMRC online Tax Dashboard which includes PAYE.

  • HMRC’s URL to set up Employer PAYE Services: http://online.hmrc.gov.uk/login Go to www.online.hmrc.gov.uk and login with your User ID and password and you will be taken to the 'Main menu' page. Within the 'Your HMRC services' section of this page, there is a 'Services you can add' section to subscribe for ‘PAYE for Employers’ to access a PAYE scheme account.

However, few employers using agents make use of these services because SME payroll clients expect their accountant or payroll provider to manage all aspects of their PAYE liabilities and statutory reporting.

Only limited numbers of SME employers subscribe for on line PAYE account services despite the fact that most employers registered for VAT have a Gateway user ID and can readily access their PAYE account. HMRC’s restriction of PAYE security permissions to agents to file only runs counter to the understanding of PAYE shared by accountant and client, which is that the agent takes responsibility for ensuring their client’s statutory returns are submitted correctly, and on time, to ensure that penalties are not incurred.

The majority of employer clients do not have access to the full picture on PAYE RTI, because bluntly, in their view, that’s what they pay their accountants for. And even where both sides have access to their respective data - the RTI returns submitted and the PAYE account balance of liabilities (including payments) - neither side can easily share this data without undertaking their own reconciliation exercise.

This is the PAYE RTI information gap and it’s where the profession’s attention is now turning after 3 months of real time reporting.

The particular challenge it presents to accountants in the event that issues do arise with PAYE reporting retrospectively, is they will have no advance warning until clients inform them that HMRC has contacted them regarding a discrepancy. The challenge and cost of having to identify any errors in HMRC’s reconciliation of return data that was submitted in real time, potentially long after the submission, is likely to be significant. Practice payroll is trying to assess the cost impacts of RTI reporting now that RTI has been in operation for a quarter. Any reassessment of the costs of providing RTI payroll services undertaken without confirmation that all is well with clients’ PAYE accounts will be incomplete.

HMRC’s plans for the routine issue of PAYE statements to employers (and agents?) or even penalties for ‘inaccurate’ returns are not clear. However unwelcome, a prompt penalty notice or warning of a provisional penalty would at least serve to highlight any discrepancy between the amount of PAYE paid and the RTI return values HMRC have allocated to the employer’s PAYE account.

Ideally, HMRC would provide automatic access to PAYE accounts to agents online, as part of the agent’s Gateway agent access permissions. This would satisfy the agent and client requirement to see not only that the agent has reported RTI on time, but the client’s PAYE account reconciles correctly. Given that RTI reporting is electronic and the obligation on employers is to report in real time, or near real time (HMRC currently only reconciles Employer accounts on 6th and 20th of the month) it is clearly preferable that agents have electronic access to their client’s PAYE accounts. Although HMRC has committed to give agents access to a tax dashboard as part of the roll out of additional online services under the Agent Strategy agenda, Lin Homer confirmed on 18 June this will take place “over the next three years”. There is as yet no definite date.

This issue was raised by Rebecca Benneyworth as long as two years ago here on AccountingWEB Access to PAYE records online. (Over 2 years on, the post is still highly relevant and well worth a read.)

Those employers who do subscribe to their HMRC PAYE account online commonly share their own Gateway user ID and security details with their accountants, not least because the PAYE data available there was generated and submitted by agents in the first place.

This practice of using client secure ID log in details does not reveal any data values for which the agent is not themselves responsible in another form. HMRC’s plans to make available a paper PAYE account statement to agents by post are less than ideal.

Confidence is created by transparency and ultimately agents need sight of HMRC’s reconciliation of their RTI returns. They need to know that their payroll service has returned to a ‘steady state’. Accountants in practice are highly sensitive to the risks RTI data failures pose to their relationship with clients. The RTI information gap is central to this issue because, while the obligation and means to report RTI sits with the agent and their RTI payroll software, the legal liability for all aspects of PAYE and RTI compliance remains firmly with the client.

Transparency and shared visibility of RTI submissions and the client PAYE account, for both client and agent, is the best way to ensure any unforeseen issues with the operation of PAYE do not damage client relationships or create additional costs. Additional costs which practice might struggle to recover from clients who find themselves facing penalties for which they do not consider themselves responsible.

Worth a conversation with payroll clients? Yes.

CreDec Client Services are available to provide expert guidance on how to verify PAYE liabilities in the event of discrepancies between client RTI submissions and PAYE accounts by reference to payroll payment options.

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