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.
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.
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.|
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.
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.
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.
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.’
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.