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RTI: Time to tackle the snags

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24th Sep 2014
Editor in Chief (interim) AccountingWEB
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The RTI penalty delay announcement earlier this month raised all sorts of questions. The most commonly expressed view on AccountingWEB and elsewhere was that the delay was a welcome surprise, but why were the government and HMRC still so determined to impose such a complex and draconian reporting regime on employers when the data coming out of the system appeared not to meet the requirements for which it was designed?

HMRC responded this week: “We have always said we want returns not penalties. This is why there were no in-year filing penalties in 2013-14, and why we decided in February to give all employers an extra six months. Since then, we have been looking in detail at how best to ensure a smooth transition for HMRC and employers, particularly smaller employers.  We believe this is the best approach for HMRC and our customers as we all get used to the new automated penalties.”

The department continues to maintain that RTI is working well: “Our most recent figures show that over 96.9% of PAYE schemes are successfully reporting RTI which represents 99.7% of the PAYE population and 70% say that RTI is easy.”

But AccountingWEB member kenny achampong challenged this optimistic view: “Whenever I speak to them they tell me they can't give me clients’ PAYE income details either on the phone or by post as there is an issue with the details supplied by the employer. I try to find out what exactly the problem is and it’s normally not having the correct year end info reconciled, but have also been told they cannot give any details out as the information they have is just too unreliable now.”

Michael Harle offered a classic good news/bad news summary of the situation: “I agree this delay is of benefit to clients and accountants alike. I do fear the real reason is that HMRC finally worked out how many penalties they would have to issue, and then deal with, next month and realised they are hopelessly under resourced to cope with this.”

These observations are typical for many AccountingWEB members, who are having to wrestle with RTI’s technical and procedural details. But because of the direct link to the universal credit and welfare reform, those closely involved with the project highlight the top-level political significance of the issue. With universal credit now stalled, it’s difficult to tell what the operating parameters for RTI are supposed to be and which way HMRC and the Department of Work and Pensions (DWP) are likely to turn next.

AccountingWEB set out to find out.

An analysis from Bacs payments specialist CreDec highlighted the HMRC press announcement that it will be looking at “alternative means to encourage RTI compliance” ahead of March 2015. Further guidance issued to RTI stakeholders and payroll software developers confirmed speculation that HMRC’s somewhat coded statement related to use of the RTI Bacs hash code.

As the official Bacs partner for ICAEW, CreDec naturally views the hash code and Bacs a readymade solution to proving the time and amounts of payments to employees, which would immediately resolve any reconciliation arguments between the department and taxpayers.

“For those employers that choose to pay employees by direct BACS, payroll software inserts identical hash codes into RTI FPS reporting and employee payments, automatically,”  CreDec said. “Watch this space. There’s obviously more to follow.”

Departmental politicians and civil servants seem reluctant to openly endorse this route, presumably because Bacs is not so widely used among smaller businesses and perhaps, in HMRC’s case, because it would be an admission that their data really is in a mess.

The scale of that mess is apparent from the vehemence of frustration expressed by members during the past two weeks, and the continuing catalogue of impractical filing demands on small businesses and their agents, confusing guidance, inaccuracies in Business Dashboard PAYE data, mistaken late GNS late filing notices and unwarranted attention from HMRC’s debt collection agents.

Kazmc, one of our regular contributors on this topic, offered a comprehensive list of complaints, of which this is just a short extract: “We were in the pilot and I have to say nothing has improved since then, in fact I would say it is getting worse.

“We have inspectors turning up at clients’ businesses demanding they make a payment to clear an underpayment, I call HMRC as the dashboard is not clear only to be told, and I quote, ‘Oh don't bother looking at the dashboard, all the postings are wrong on there.’

“So how do HMRC know there is an underpayment? I speak with the inspector a few times, send her details via email and request in writing that any further action is put on hold until we have had time to look into things further as we believe there is no underpayment. And that is one client... Imagine the extra time we are spending with the amount of payrolls we process...

“And then when you need to talk with HMRC it is a long painful process firstly to get through to them and secondly to talk to someone who understands RTI... I used to love my job.”

AccountingWEB members are not mindless technophobes, but professionals who have been adversely affected by the extra workload and stress created by the transition to RTI. Member Ray Backler commented: “There is nothing wrong in principle with the idea of RTI, it is just the major gaps in knowledge applied to the design and implementation that have caused these problems.”

A similar view is expressed by Kevin Hart, chairman of the business software trade body BASDA.

Like many other organisations and stakeholders, the payroll software industry put in a lot of effort into consulting with HMRC on how the system should work and then supporting it within their programs.

According to Hart, the extended relaxation of penalties for sub-50 employee businesses does make matters more difficult for the industry, both in its messaging to small businesses and its chances of recouping its already considerable investment in RTI.

“On behalf of the industry I worry about how much irrecoverable work may be asked of us to deliver the next generation of RTI,” said Hart.

From the outset RTI was predicated on the DWP needing the data for UC. “What we should not lose sight of is how well RTI is doing in terms of providing the necessary data for UC,” Hart said.

In the past two weeks, it would appear the answer is not well enough. 

While voicing these concerns, the BASDA chairman is still firmly committed to working towards a constructive solution. How well this happens will depend on both DWP and HMRC working with the software industry and payroll agents to find a workable implementation strategy.

“The challenge is to do things constructively and collaboratively rather than bleating about previous encounters,” he said. “The DWP’s involvement with the software industry in earlier, headier days of RTI scoping was notable by its absence.

“With significant changes in HMRC leadership, engagement and trust is moving in the right direction. We need this to happen pan-government in an open and collaborative way to find a workable solution, as indeed we must do on other important issues such as identity assurance (IDA) and e-invoicing.”

Moving on to the technical possibilities, Hart claims credit on BASDA’s behalf for the original hashcode “interim” solution that was adopted and is now supported by both HMRC and the Bacs/VOCA electronic payment systems.

While Bacs/VOCA is still seen as a corporate solution used typically by medium-to-large organisations, payment technology is moving so quickly that before long most internet banking solutions should be able to support the RTI hashcode (with minimal change), greatly extending the reach of verifiable RTI payment data, Hart said.

Whether those observations are taking hold in Whitehall is as yet unknown.

Practical suggestions

The advice from AccountingWEB members on the frontlines of RTI takes a more practical form. As a first step, timkingcott urged the department: “Let us just admit as grown-ups that we are both in trouble on this issue.”

Pointing out that like the payroll industry accountants have been “unpaid implementers” of the new system that has on occasion embarrassed his relationship with clients, he asked HMRC: “If we are a day late is this really such a crime?”

The automated penalty regime itself was part of the problem, as it created the spectre of huge amounts of appeal work to challenge “on or before” late filing penalties. Why could HMRC not go back to the more pragmatic stance it used to take on enforcement, wondered Oldmanwetmix.

Another old tradition that is now backed by an epetition, is to ditch the on or before requirement and return to a 19th of the month PAYE reporting deadline.

Everyone is keen to talk about RTI and to explore ways of getting the system to work more efficiently - except for the people who are actually in charge of doing so. Like BASDA and AccountingWEB's members, we look forward to seeing a more open dialogue on the subject.

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Replies (15)

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Euan's picture
By Euan MacLennan
25th Sep 2014 09:52

Some honesty would be a start

John Stokdyk wrote:

Like BASDA and AccountingWEB's members, we look forward to seeing a more open dialogue on the subject.

Every time that HMRC announces a postponement of penalties, they claim that it is to allow (small) employers more time to comply when, in fact, we all know that it is because HMRC needs the time to improve its computer system.

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By Mike Nicholas
25th Sep 2014 13:31

RTI and BACS hash matching

It's been quite a while since I saw any stats on the success rates of HMRC matching hash data in FPS returns with the data supplied by Voca from the Bacs submissions, but in the early days I believe there were high numbers of discrepancies. Maybe the matching rate has improved, but if not I can only think the idea of using the hash data may turn out to be:

a waste of HMRC's time/resource, oranother way of identifying errors in returns so that more penalties can be imposed, or a diversionary tactic (look, squirrel!), orpart of a cunning plan to return to HMRC's preferred data submission route for RTI returns which was via Bacs.

I dread to think of the volume of discrepancies in data entry which will arise when employers and pension payers have to manually enter the hash data in FPS returns and in the internet electronic payment records. As things stand HMRC's BPT calculator does not generate a hash string etc.

 

 

 

 

 

 

 

 

 

 

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By jifar
25th Sep 2014 13:45

RTI hassles

The company I work for had a visit from an hmrc revenue collector recently. I had failed to keep marking the 'claiming employer NI allowance' field with each return. We had claimed the whole allowance in one month as out NI levels enabled us to do that. As there was no more to claim I stopped setting the flag in subsequent months. They removed the whole allowance and treated us as £2000 in debt. At no point did anyone just contact us to ask if we really were claiming the allowance. They sent a letter while I was on leave and a couple of days after the letter arrived along came the revenue collector. I have attempted to make a formal complaint.

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Replying to accountantccole:
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By Mike Nicholas
25th Sep 2014 14:19

EA Indicator

As far as I'm aware it's only necessary to enter the EA indicator once in an EPS. It's not necessary to repeat this in subsequent EPS returns.

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By Kazmc
25th Sep 2014 14:08

EA Indicator

Yes we only have to mark the EA indicator once in the tax year via an EPS.

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By Myshkin
25th Sep 2014 14:32

Agents access to Dashboard

Clients keep giving us their demand notices from HMRC but I can't do anything with them because I don't know where HMRC are getting their figures from without access to the dashboard.  When clients give me their ids/passwords then I can help but I mentioned in a phone conversation with someone in HMRC that this was happening and he said "this phone call is being recorded you know" !

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By Kazmc
25th Sep 2014 14:37

Dashboard

We have applied for access to the dashboard on behalf of about 150 of our clients as we need to see the account. As far as I am concerned HMRC have put us in this situation whereby we have no choice but to take this action. you cannot even phone up and request a copy of the account anymore so what do they expect?

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By graffle
25th Sep 2014 15:11

no help for very small concerns

A six month delay in imposing penalties is not going to change the difficulty in always getting the returns "on or before" payday for me.  I usually do, but being a sole practitioner, and with cafe client(s) who pay staff weekly, variable number of hours, so I can't post in advance - am I not allowed a holiday/sickness/other?

Sorry, I know it's been said many times before on this site, but I just thought I'd day it again!

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Replying to SteveHa:
Stepurhan
By stepurhan
25th Sep 2014 17:28

Another repeat

graffle wrote:

A six month delay in imposing penalties is not going to change the difficulty in always getting the returns "on or before" payday for me.  I usually do, but being a sole practitioner, and with cafe client(s) who pay staff weekly, variable number of hours, so I can't post in advance - am I not allowed a holiday/sickness/other?

Sorry, I know it's been said many times before on this site, but I just thought I'd day it again!

What do those clients pay to their variable hour staff if you are off for holiday/sickness/other? Do they have to guess the net pays? This is not an RTI problem. This is a "dealing with PAYE incorrectly in a way no longer possible because of RTI" problem.

If you haven't got cover for such a time-sensitive service, you should not be offering it. Cue accusations that I don't live in the "real world" where no-one cares about the risk of over/under paying employees if the calculations aren't done properly. (a problem that has existed as long as PAYE has)

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Replying to Spacedust:
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By graffle
02nd Oct 2014 07:01

As long as I'm somewhere that I can get a signal I can usually work round it. I am well aware that the world doesn't easily accommodate tiny technophobe businesses such as this particular client.
It would just be easier if there was a little leeway, that's all.

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By Briar
25th Sep 2014 15:38

Filing by 19th of month following is by the best solution

It has been asked for many times as the sensible and pragmatic solution to many of the practical problems. Why don't HMRC listen and do it? If they did they would not be embarassed every 6 months when they have to delay the implication of the penalty regime (again).

I will continue to file on the 10th of the month, continue to receive (and ignore) loads of generic notifications about late delivery. All my clients are micro-entities so they are not penalised.

If HMRC help us, we can help them. But if they continue with their unhelpful attitude, I will continue with mine.

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Euan's picture
By Euan MacLennan
25th Sep 2014 18:05

Dashboard

Rather a stupid name, but there are a number of problems with the client's online PAYE account:

it is not available to agents (you have to log on as the client).it is updated, I believe, only twice a month - whatever happened to Real Time?HMRC tends to allocate payments on a FIFO basis, not to the tax month indicated in the payment reference, so you have to work your way back through split payments to trace where any discrepancy might have arisen.some of the entries on the PAYE account are simply wrong.

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By North East Accountant
26th Sep 2014 08:24

Keep it Simple
Reporting: By 19th of Month
Payments: Issue a full statement
Services: Don't do payroll, let someone else have the headache.

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By AndrewV12
01st Oct 2014 10:42

Well done AccountingWeb and its members

Well done to Accounting Web and its members for keeping the pressure on HMRC re RTI, if its saves clients paying fines and the fall out for Accountants its well worth it, well done all :)

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By LynneLamb
19th Oct 2014 01:54

Employer's view

Now that RTI has been in force for a year and a half, the general ineptitude of HMRC is the reason that I am not surprised that they are still making errors on individual's records.

Several times I have received coding notices which make incorrect assumptions about the person's earnings split between two jobs, meaning that they end up overpaying tax, or even underpaying. Many people are on fairly low incomes, so it is important that their income is consistent and correct.

The RTI system should ensure that tax is levied correctly, but it doesn't.

This then forces the individual to have to contact HMRC to discuss and correct the situation, often when they don't really understand it. Goodness knows what will happen wit Universal Credit.

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