RTI errors are real and continuing

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Kate Upcraft reviews ongoing RTI issues which could undermine savings from Universal Credit and may have long-term implications for MTD.

Issues for Universal Credit

The ICAEW has recently published their post-implementation review of RTI. It outlines the very significant ongoing issues with RTI for businesses, and also considers the impact this will inevitably have on the successful deployment of Universal Credit (UC).

The rush to implement RTI for all businesses in April 2013 was driven by the ambitious roll out plans for UC. Monthly earnings data would be used to flex UC awards. As we now know, merging six state benefit into one was more challenging than expected, so the roll out of UC was delayed.

This should have been a blessing in disguise, giving HMRC extra time to ensure the stability of systems and the necessary data validation before that data was used to adjust the household income of millions of claimants. Whilst those of us on the outside of HMRC hope that this breathing space was wisely used, we don’t yet know that it was.

Where is HMRC’s review?

The publication of HMRC’s post-implementation review of RTI could have provided reassurance about the validation of RTI data, but it hasn’t been published. It is not clear why.

In the absence of proof that HMRC has learned lessons from the RTI implementation, I worry that Making Tax Digital (MTD) will generate similar problems, based on my daily experience of RTI and how this data will feed into taxpayers’ Personal Tax Accounts.

Reviewing signs

Over the last two months I have pulled together evidence from a number of apparently disparate threads concerning RTI errors. I wonder if these are just the tip of the iceberg.

September

My clients began to report:

  • An upsurge in incorrect under and overpayment letters being issued by HMRC’s debt management and banking department. Some of those letters were dated in April 2016 but were issued six months later, leading to immediate field force collection action on the basis that the debt had been outstanding for months – which clearly it hadn’t.
  • Higher than normal levels of incorrect tax codes post P11D submission.
  • Business tax accounts with blank fields where figures had been shown previously.

HMRC posted this message on their PAYE Service Issues page:

PAYE accounts not showing the latest positionHM Revenue and Customs (HMRC) are aware that some PAYE accounts are not showing the latest position. This is being investigated urgently and an update will be published here when the issue has been resolved. If you believe that your account is incorrect and you wish to check the current position, please contact the Employer Helpline.

October

I run four small payrolls on a voluntary basis, but two of those have errors; one dating back over 18 months. The other PAYE account shows four payments made in the months of September/October which don’t correspond at all with what was actually paid by the client.

November

As of mid-November HMRC’s message about inaccurate PAYE accounts remains on the PAYE service-issues page, and details of the problem haven’t been communicated to employers via the October Employer Bulletin, nor via any other update.

Wider experience

My experience is duplicated by employers and agents I meet around the country, all of whom have examples of PAYE accounts not balancing for years. This causes reputational damage for the agent and client, and unwarranted compliance action from HMRC. A huge amount of non-chargeable time is expended to try to restore the client’s faith in the agent and in the PAYE system.

Lessons for the future

We know that the RTI data we have lost faith in will form the bedrock for what 7m taxpayers will see when they log on to their personal tax accounts from April 2017. Given the introduction of in-year near-real-time tax coding from April 2017, taxpayers may be driven to distraction by the pinging of texts from HMRC, prompting them to view yet another new tax code.

I hope that the earnings data the taxpayers will see, and their tax codes, are accurate, otherwise agents and employers will also be deluged with real-time queries from those taxpayers worried by what this transparency reveals.  

MTD savings?

Two high profile HMRC figures have defended the plans for Making Tax Digital recently. Jim Harra wrote to the FT asserting that there will be no additional costs to businesses, as their current record keeping software will suffice, and that free software will be available.

Of course none of us have seen this free software. We also have no formal confirmation that Excel spreadsheets will be considered digital record keeping. Equally we don’t know how HMRC has calculated that there will be no cost to most businesses, and yet they plan to provide financial help with ‘transitional costs’.

We have yet to see any savings for agents or employers materialise from the introduction of RTI, despite the fact that the project got the go ahead on a predicted £300m of savings. Was the £1.3bn of funding given to HMRC for MTD also based on a flawed cost/benefit model? 

Theresa Middleton is now in overall charge of the MTD business programme at HMRC. She was critical of the RTI deployment as head of ABAB, but she seems to have suddenly acquired rose-tinted glasses. She writes in Taxation Magazine: ‘We appreciate that there are concerns about the pace and ambition of this change. There were similar concerns around previous digital changes such as mandatory online filing and RTI for PAYE. Our track record of successfully delivering these services however speaks for itself.’

Conclusion

We shouldn’t ignore the fact that MTD is not just about businesses interacting with HMRC, it’s also about individual taxpayers, most of whom only have their employers or payroll agents to represent them when tax matters go awry. When you overlay the possibility of benefits being paid incorrectly or being stopped, based on flawed systems and data, the risks associated with MTD become all too apparent.

If you haven’t kept up with the Concentrix debacle where thousands of claimants have had tax credits stopped based on flawed RTI data, it makes sober reading. Now that the tax and benefits systems are so reliant on each other we must be absolutely certain that all those impacted by such changes, particularly the most vulnerable, are not disadvantaged.  

About Kate Upcraft

Kate is a technical writer, editor and lecturer on all aspects of employing people - primarily payroll and HR matters.

Replies

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16th Nov 2016 19:25

I totally concur with that summary of the RTI mess. If "success" is getting 99% of people to do something when you put a gun to their heads, then RTI is a success and no doubt so will MTD be one.

If your definition of success is having accurate tax records which agree to what people have submitted to you, then RTI has been a failure.

Captain Smith a.k.a Mr. Harra can stand on the bridge and say there are no icebergs, full steam ahead lads! all he wants. That did not work on the Titanic and it won't work on MTD either.

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18th Nov 2016 11:14

I do get the impression that the allocation of receipts for PAYE & NI is broken, and that periodically the mess gets dumped on the "debt" recovery teams.

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18th Nov 2016 11:15

I too run a small payroll bureau and have had around a 40 per cent error rate in notifications of incorrect paye balances, allocations and codes. Each one takes time to sort out which I cannot realistically recharge to my clients since the implications are that I am submitting incorrect data. The MTD rollout can,I fear, only lead to more issues particularly amongst my client base of small businesses.

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18th Nov 2016 11:22

In connection with the payrolls I run I too am bombarded with spurious letters and demands arising from the inadequacy of the dashboard.
Until such time as agents are given a dedicated line to sort matters out I have taken to ignoring such missives (with the permission of my clients). The dedicated line to debt management is no good as they are only dealing with the reports generated.
My records are correct. Those of HMRC are not.

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18th Nov 2016 12:06

RTI is perfect according to our Glorious Revolutionary Leaders.

Beware, or you dissidents may end up in the Gulag!

Long Live Big Brother!

Long Live Big Brother!

Long Live Big Brother!

(has someone/thing hacked my account?)

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18th Nov 2016 12:35

I am getting sick of dealing with specified charges where an EPS has been filed and an email confirmation from HMRC received, I am wasting hours dealing with these.

MTD = Making Things Dire

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By frankfx
18th Nov 2016 12:40

Kate you state that your time costs resolving the errors is not recoverable... From the client.

Many accountants will echo your stance and attitude.

With anger, though.

But ultimately we are doing our clients and ourselves a disservice.

En masse we should encourage clients to accept our fees for correction to HMRC errors.

Then prepare the paper work for clients to recoup the fees from HMRC.

If the profession acts as one, then the reluctant client may feel "safe" to follow our advice.

This will drive home the message to HMRC.

The compensation cost will be newsworthy as HMRC will be obliged to provide this information.

But we must get clients on side

Therein lies the problem

And HMRC know that full well, so the outcome is a Kate Upcraft article, showing HMRC failures and the professions acceptance

Are there ANY firms out there consistently charging and recovering fees on client's behalf?

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By cvsmith
18th Nov 2016 13:06

"Our track record of successfully delivering these services however speaks for itself."
She's not wrong there and the fact that they have proved inefficient is why we are asking for a rethink of MTD.

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18th Nov 2016 13:52

I agree with all the comments made and until HMRC MTS (Make Tax Simple) and they have ledger accounts for taxpayers rather than allocation system nothing will change.

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18th Nov 2016 16:48

An upsurge in incorrect under and overpayment letters being issued by HMRC’s debt management and banking department.

Were all dragged into this mess, RTI is poor, the clients get hassled and who do they contact first....us.

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By frankfx
18th Nov 2016 17:21

Carolemcarre feels that clients will assume that she is at fault.

Therein lies the tragedy.

We all share that sour experience

A suitably worded explanation and apology should be demanded from HMRC. If fee recovery is not sought.

Carole can then build a, redacted, portfolio of apologies.

This portfolio can be shared with clients.

A new client should be forewarned that HMRC customer service , like the NHS, is creaking and only survives through agent goodwill.

I extract apologies from HMRC, if only to demonstrate to clients the swamp of inefficiency in which HMRC expect us to run our business.

To generate wealth and taxes for......

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18th Nov 2016 18:11

Whilst I am in no way defending HMRC and their pathetic attempts to embrace the digital age, in the main, provided the "input" rules are adhered to things do appear to run ok. But, make a human error, make a payment on a wrong date, miss one month and make two payments the next month letters are issued claiming under and/or overpayments.
If the letter claims there has been an underpayment the client is told "we are monitoring your payment record and expect you to keep payments up to date". Where the letter claims there has been an overpayment it says something like "we need to be satisfied this is the case and require proof from you. It will be insufficient merely to say you made a mistake".
At that point we agents need to talk with someone with more than one brain cell but we cannot. Until more resources are put into this area all is lost. I shudder to think how many trees are being felled to feed the eternal paper chase.
I did start to keep a file of the utter rubbish spewed out by HMRC but had to abandon it as it was getting larger than clients' files and I was spending too much time on it.
To all those at HMRC in charge of digitalisation please, please listen to us agents. In my view if you continue to shut us out you will not be successful in your endeavours.
We are monitoring you.

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19th Nov 2016 10:19

My routine response where I am on solid ground is on the following lines:

"You appear to have sent my client a threatenting letter based on fabricated and spurious data. Clearly your system has failed catastrophically to arrive at such a blunder.

Please desist from sending my client such letters until such time as you have fixed your system. Take note that if you carry on with threatening letters, my time spent dealing with them will form the basis for both a formal Complaint Case and Compensation Claim."

You know what, quite often that's the last thing we hear of it! A few times I have had to carry out the threat, to date total compensation paid has been about £1,000. I suspect HMRC has my practice flagged up with a "don't mess with this guy" flag in the database.

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21st Nov 2016 15:38

I have one specific client where the RTI data was captured fine for months 1 and 2, then went awry from mth 3. The error is a shortfall of liability and now my client has amassed an overpayment >£6k...which, of course, they haven't.

This has been passed to the resolutions unit/team who, I was informed, "will probably not get back before the end of the tax year"!

Can anyone explain why, when we file electronically with full html tagging on every little bit of info, the HMRC system does not update near instantly?

If I go to Australia and use my debit card, then check online banking using my smart phone, the transaction appears within 1 minute. How can this not be replicated by HMRC systems?

As for the constantly shifting sands that are payments by 'customers' and their mysterious, flexing allocation methodology. Well...

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21st Nov 2016 16:17

Probably because the HMRC systems are rubbish having been developed on the cheap.
But what should they care.

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24th Nov 2016 11:59

The design of RTI was fundamentally flawed. Its biggest flaw is the inability of agents/employers/bureaus to access detailed statements of account (at employee level) of what is held in the RTI system. So once the high level numbers being claimed by HMRC are wrong (which happens far too frequently) there is no way of working out where the error has arisen.

This was frequently pointed out (in 3rd party software developer meetings with HMRC) as a sure and certain failure point of the original design. And repeated assurances were given in those meetings that the issue would be looked at. Nothing ever happened because the people implementing RTI at HMRC didn't care; they knew that they'd have moved on by the time the chickens roosted and the design was "already done and paid for". So much for the year of pilot operations (exhibiting numerous reconciliation failures) which didn't influence the final design!

No-one would operate a credit card account or bank account on the basis of accrued historical summary totals. The very idea is laughable as it would make reconciliation a hopeless task on even the simplest lowest volume account. Yet this is how RTI (with numerous running totals of pay/tax/SxP/loan/NI/etc) is expected to work. Of course it fails!!!

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By Kazmc
07th Dec 2016 13:05

We had a phone call from a new client to advise HMRC Debt Collection had phoned him demanding £6k. When we looked into things the figures on the FPS we sent bore absolutely no resemblance to the figures HMRC had received! They advised it was probably an error in the interface between our 2 systems.
They then very helpfully said it wouldn't be looked at for at least 8 months. Makes us look so incompetent.

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