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.
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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