Will RTI reporting changes improve data quality?

Outlining changes HMRC wants to make to data collection, the government response to the consultation Improving the data HMRC collects from its customers was released in April 2023. The Chartered Institute of Payroll Professionals (CIPP) and its members are particularly interested in the changes to real-time information (RTI) reporting. 

HMRC proposed requiring a numerical input of hours worked, rather than continuing the use of the current system of banding the hours worked. Additionally, band “E – Other” would be split out into exemptions to provide more clarity as to why a figure can’t be provided. 

The response concluded: “Employers are already required to keep records of the hours their employees work to satisfy NLW and NMW rules, and in some cases, display this information on payslips. Respondents also confirmed that employers will hold details of contractual hours worked for payroll purposes.

“The government will therefore proceed with collecting improved data on employee hours worked. This will request information on contractual hours worked where those contractual hours are reasonably stable (such as not a zero hours contract) and actual hours worked for hourly rate employees, which will be proportionate and minimise additional burden. HMRC will work closely with businesses and software providers to ensure clear definitions and requirements and adequate time for implementation of changes. The government intends to share draft legislation for technical consultation on this change with affected businesses and organisations in the coming months before including in a future Finance Bill.”

CIPP think tank

HMRC approached the CIPP and asked us to run a think tank for our members on the proposals and to collect further information on potential barriers. Naturally, we pushed our luck and asked for two sessions instead – one for in-house payroll professionals and another for those in a bureau or accountancy practice environment. This is due to the vastly different ways they’ll have access to, or control over, the data collection processes necessary to comply with the new rules. 

Luckily, HMRC agreed, and we ran the two sessions, allowing members to come forward with their views, concerns and questions. 

Many questions from attendees centred on which hours should be included and what happens when a worker is off sick, or when hours are worked but not paid? Additionally, what can be used for workers who are paid daily rates?

This highlighted the serious need for clear and informative guidance on the matter – something that’s applicable to any change HMRC pushes out, to be fair, but one that needs stressing time and time again. Thankfully, the HMRC representatives were keen to take these suggestions on board, and to build further examples and case studies for use in the guidance. 

Mandatory numerical declaration 

The main concerns from bureau and accountancy practice attendees were mainly focused on the action of getting the data from clients to be able to satisfy the proposed regulation. 

As I’m sure you’re aware, if a client doesn’t provide the data, you subsequently can’t provide it via RTI. But these proposed plans will make a numerical declaration mandatory, so how will we move forward? Attendees suggested that a figure may end up being provided, but the validity or accuracy of that figure may not be where HMRC expects it to be. This would result in additional data requirements, which wouldn’t necessarily improve the quality of that data, far from the aims of the new policy. 

Outsourced payroll providers fed back that this inaccurate data could lead to HMRC opening compliance action based on such data. As the responsibility for providing accurate information would still sit with the employer, this isn’t something that’s likely to directly impact providers, but could have knock-on impacts on client relationships. 

From the government response above, we can see that HMRC is of the opinion that the data it is asking for is readily available and easy to calculate. As this data should already be collected for national minimum wage calculations, is HMRC right in its thinking? Do businesses need to suck up any administrative burden as it’s what they should have been doing all along, or are the new requirements just a touch too far for some payroll service providers?