Despite mistakenly sending late filing alerts to 400,000 organisations earlier this month, HMRC’s head of personal tax reassured AccountingWEB members that the real time reporting system for PAYE is working as it should.
RTI boiled back to the surface on 7 February when dozens of AccountingWEB members started complaining about late filing alerts from the RTI generic notification system (GNS), when as far as they were concerned they had filed correct returns for the period to 5 February. They were the tip of an iceberg, as thousands of companies and advisers called software suppliers and HMRC to find out what they were supposed to do.
For those who were able to get through, the advice from HMRC’s helpdesk was to ignore the messages.
A few days later, HMRC announced that because of teething troubles around the RTI systems, the department would suspend automatic penalties for late filing until October 2014, and automatic penalties for late payment would not kick in until April 2015. This effectively extended the RTI “soft landing” period by an extra year. Employers who pay late under RTI between now and October, however, will be charged interest on the outstanding sums.
RTI continues to arouse intense interest and emotions within the profession. During the past three weeks, AccountingWEB items on RTI have been read nearly 20,000 times and more than 150 comments have been posted on the subject.
Against this backdrop HMRC’s director general for personal tax, Ruth Owen, met with AccountingWEB to discuss the issues raised by members.
Answering the first and most basic question about whether RTI was actually working, she said: “I think RTI is working very well. We’ve now had 30m submissions. We’ve got 99% of employer records being reported in real time. Our research is saying customers are getting used to it. So 70% are saying it is now easier to deal with RTI, or much better than they thought it would be; 82% of people are now reporting on or before and that’s increasing month by month. Given the scale of the changes to PAYE, I think it is working.
“We always recognised this year would be a transitional year in terms of dealing with 1.8m businesses and their representatives, and HMRC’s systems all needing to fit together and work together. It would never be a year without issue, but generally it has worked.
“Where we have had problems, and we have, we’ve tried to be honest about that and have listened to what customers have been saying, and we’ll work with anyone to resolve them.”
The 7 February GNS messages were a flashpoint, but the 400,000 notices shouldn’t have been sent, Owen revealed.
In the run up to automatic penalties, she had worked with accountants and other stakeholders to devise messages that would explain to employers that if they continued to file late or forget to send nil payment (EPS) returns, they would be punished.
“That was the idea. In reality we haven’t been able to target them as sharply as we hoped and they went to people who had complied.”
HMRC had already decided to suspend the GNS messages, but 400,000 still went out on 7 February because “we didn’t get to the system quickly enough to stop them”, Owen said.
The number and variety of teething troubles that blighted RTI triggered prompted numerous calls for the penalty delay from industry representatives and professional bodies. Owen identified four main issues and gave an overview of the causes behind them:
- Duplicate records - “These have always been an issue in PAYE. RTI has multiplied them because people are reporting more frequently,” she said. There are now roughly 420,000 duplicated records within the system, but 95% have been resolved. The current number of taxpayers who are affected by tax code errors stands at 20,000.
- Disputed charges - the differences in reconciliation that mean HMRC thinks you owe £10,000 when you are convinced you only owed £5,000 and are up to date.
- Business tax dashboard - Many mismatches in figures are caused because employers and advisers are not aware that although they are reporting in real time, the dashboard is only updated twice a month
- Generic Network System messages - "“They have gone out to some people who didn’t need reminding. We put a system update in place that day to reassure taxpayers they didn’t need to act,” Owen said. The messaging system that dispatched the 420,000 alerts that caused the recent aggravation is being reconfigured in response to feedback.
Over the next week or so, AccountingWEB will publish more detailed articles investigating each of these issues and presenting HMRC’s explanations in more detail. These pieces will be linked into the list above, and referenced again at the end of this article.
The 420,000 duplicated records created during the past year is the most significant issue, and could potentially threaten the end of year reconciliations in April, reviving memories of 2009-10 when the department faced a backlog of 6m PAYE coding errors.
“We have been here before and the pilot showed the risks of duplicates,” said Owen. If HMRC’s system gets a a submission on which the employee’s name or other details have changed , it will create a new record, which could trigger a new, erroneous tax code.
“We know it happens. We’ve now programmed the system to spot it so they don’t actually impact on people’s tax.”
Common errors are now auto corrected, or quarantined; these measures have eliminated 95% of the duplicates during the year. Thanks to quarantining, most of those remaining 20,000 people have been contacted and their codes corrected, she said.
Looking ahead to potential issues at the year end, she commented: “It’s bound to create problems. My commitment is to work with stakeholders and your readers to make sure we plan as carefully as possible ahead. We will listen to what people are worrying about up front. And if people raise an issue we will pick up feedback and act immediately.”
Even though accountants will have heard it before, Owen has no qualms about playing the “we’re listening” card on HMRC’s behalf. But she is also equally willing to acknowledge mistakes and apologise for them.
“If you try and sort out your payroll at the end of the pay period and if it’s not working for you or when you log in to your dashboard and you’re not recognising the figures HMRC is paying back to you, it must feel very frustrating and I am sorry to anyone experiencing difficulties.”
Over the next month, fingers will be crossed both in Whitehall and in the payroll world that the department really has overcome the worst of its RTI difficulties.
Stay tuned to AccountingWEB over the next week as we investigate the RTI teething troubles in more detail. If you have any experiences or points you want to bring to HMRC’s attention, post them below. HMRC’s director general for personal tax says she reads them all. “We are keen to hear feedback from anyone on how it’s going.”
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AccountingWEB’s Editor at large has been with the site since 1999, rising from news editor to editor in chief, global editor and head of insight. As a roving editor, he continues to investigate the profession's use of technology around the world. He devotes his spare time to technology history and an oddball collection of stringed instruments...