HMRC has apologised for worry and inconvenience caused to taxpayers by the issue of incorrect tax statements and cheques since mid-September. In a statement published this afternoon HMRC said the problem affected only a small proportion of the P800 statements issued in this period, but the department’s own note to stakeholders had suggested that “several thousands of employees may be affected”.
This afternoon’s statement said: “HMRC is urgently investigating this matter to resolve the issue. In the meantime, customers who think their 2013/14 P800 may be wrong should contact our helplines for further advice before making repayments or cashing cheques. We are sorry for any worry or inconvenience caused.”
The Association of Taxation Technicians (ATT) called this afternoon for an urgent review of the Real Time Information (RTI) system and a tax director at KPMG called for urgent investment in HMRC systems.
Today’s “alarming” revelation underscores the need for collaboration with external stakeholders who have a vested interest in the success of RTI, said ATT president Natalie Miller.
HMRC was reported to have “stopped” issuing income tax refunds in these cases after an email sent to employers, professional bodies and other stakeholders revealed that end of year reconciliations for thousands of taxpayers had been calculated wrongly.
An HMRC spokesman told AccountingWEB this morning, however, that the process was “continuing as usual”. The note, passed to AccountingWEB today and reproduced here, had advised employers that an employee who queries a P800 calculation should be advised “not to repay” any underpayment shown on the P800 and not to cash any payable order they may have received. HMRC aimed to “resolve the matter and issue a revised P800 to the employee in the next 6-8 weeks”.
‘Real and serious practical problems’
Miller said: “We have been drawing HMRC’s attention to the quirks and complexities of RTI in meetings and correspondence from its inception. We have also highlighted the significant burdens it places on employers and agents. What we are seeing now are real and serious practical problems for possibly many thousands of employees at a time when building confidence in the system is crucial. Some of those difficulties might have been avoided if HMRC had heeded advice from ATT and similar bodies at an early stage.
“In light of this latest revelation, we are calling for an urgent review of the RTI system to ensure that it is fit for purpose. This is essential because every employer and employee is entitled to know that PAYE is being dealt with properly. It is doubly important because the RTI system underpins the universal credit system that is being rolled out by the Department for Work and Pensions to replace certain state benefits.”
Miller added that if, as HMRC’s reported comments suggest, the problem arose because employers had failed to send in final payment statements for 2013/14, that suggested two things.
“Firstly, that the process is simply too complex for employers to understand. Secondly, that either HMRC know the information to be incomplete and are failing to address this before placing reliance on the information, or HMRC do not know the information is incomplete, which raises the equally worrying prospect that the system cannot identify when important information is missing.”
‘Significant and urgent investment’
Steve Wade, tax director at KPMG in the UK, said that on the whole HMRC had done an “excellent job” in getting nearly all employers reporting information in real time. “Unfortunately there are some fairly major issues with the IT and HMRC systems and fixing them requires significant investment by the tax authorities,” he said.
HMRC systems were “not designed to deal with all the complexities of PAYE”, Wade added. “There needs to be some significant and urgent investment in the processing and back end software systems at HMRC which collect and process this data to generate the operational efficiencies envisaged when the whole RTI initiative was conceived. As RTI is an integral element of delivering the universal credit, it is crucial that it operates effectively.”
Wade called for “more and quicker feedback” to employers’ agents and software developers on issues as they arise.
Patience ‘wearing thin’
The BBC News website quoted Jason Piper, technical manager at ACCA, as saying: “Yet again, we are seeing errors in the operation of PAYE, and HMRC must learn the lessons from earlier problems and be transparent and accountable this time around.
“Public patience is wearing thin with government IT failures, and one like this which hits so close to home for taxpayers the length of the country, is bad news for a department trying to extend the reach of its powers into every aspect of our collective financial lives based on the power of its computer systems.”