Head of Insight AccountingWEB
Share this content
Tags:

Software tackles RTI data glitches

26th Mar 2013
Head of Insight AccountingWEB
Share this content
Kashflow logo

To anyone with a basic understanding of technology, a simple acronym has governed the entire real time information saga: GIGO.

A shortened version of “garbage in, garbage out”, GIGO’s unique hold on HMRC and the payroll profession is celebrated in the annual reconciliation of PAYE data.

Until now the department’s attempts to improve matters during the past few years only made them worse.

When it upgraded to its new national insurance and payroll services (NPS) system in 2008-9, data from more than 20 regional systems was not validated before transfer to the central database. And whenever it could not match a taxpayer to one of these existing records, NPS created a new one - (12 or 25m?) of them, a backlog that brought most of HMRC to its knees during 2010-11.

Politically, real time information (RTI) is needed by October this year to calculate the new universal credit payments every month. But behind the scenes, it also represents a last gasp chance for HMRC to bring its data on PAYE taxpayers up to scratch.

And, as is customary, HMRC is getting employers and their payroll handlers to do the dirty work for them. Before they can begin filing under RTI, they have to ensure all their employee records match the information that HMRC holds on employees - or overwrites it with new information, in the correct format.

“Bad data” is by far the most common response to questions about problems encountered during the RTI pilot scheme . By now, you will probably already have read some of the typical issues HMRC has publicised on its data quality page:

  • 128 staff records held as Mr, Ms or Mrs “Dummy”
  • 572 people whose surnames only included the letter X, ranging from Mr X to Mrs XXXXXX
  • 75 staff with the surname “Casual”; 11 “Cleaners”; 9 “Workers”; and 6 “Students” 
  • 824 employees with the surname “Unknown”.

Make sure to read beyond the eye-catching mistakes, and learn as much of the HMRC data quality requirements as you can by heart, as they will probably determine the success or failure of your first RTI submissions. As well as getting standing data such as names, addresses, dates of birth, NINOs and employment status right, remember that there will be new data types to collect under RTI, including a number of hours worked, passport number, plus a Bacs “hash” reference if you use the banks’ electronic payment system. Some of these items are optional at the moment, but be aware that they are there and that you may need to collect and report the information in the future.

So, bad information management practices got us here, but with just over a fortnight to go before RTI kicks in for the mass of UK businesses, can technology help get us out of this mess?

When individual businesses start looking for advise on tax compliance, it’s natural to start with the tax department, and some people may have discovered HMRC’s PDF-based Starter guide. This does allow you to collect most of the basic information that will have to be recorded for RTI purposes, but there’s no way to export it electronically in any meaningful way - and nor does it collect some of the additional information that will be needed, including passport numbers, hours worked and the employment status declaration.

So that’s not much help as a tool to tidy up your data. If you only have a few employees, you can also type your payroll data directly into HMRC's online payroll tool. But that is likely to result in transcription errors - and will be a thankless and repetitive task if you have to do it every time you pay employees.

But commercial payroll developers are doing all they can to address the RTI data quality issue - and selling a lot of product while doing this good work.

The payroll software response

As well as providing RTI-compliant programs to let companies make their payment submissions, many of the developers have turned their attention to data quality in recent months.

Jon Cowan, payroll category manager for Sage’s small business division, points out that one of the benefits of software is that it can ensure information will pass the basic tests as it is entered by applying validation criteria. This is particularly useful for those offering outsourced payroll services to ensure that clients they take on in the next few weeks have employee data that is up to scratch.

As it was basically designed to do, the RTI system is very good at highlighting behavioural quirks and unsatisfactory shortcuts in record-keeping that have evolved through many years.

“You’ve got to understand their behaviour, and possibly iron out quirks from preceding years as they update their records,” he said.

Sage’s payroll products assist this process, he explained, by including validation checks to ensure that names, dates of birth and national insurance numbers are all in the correct format.

The most recent release of QuickBooks Payroll, meanwhile, comes with an RTI Data Wizard. This routine guides employers through the requirements of the HMRC data quality standard in three steps.

According to Intuit’s Diana Flier, a survey of the company’s UK business customers found that a third had old employees in their PAYE records with no recorded leaving dates. The concept behind RTI is that only the employees who are paid will be reported to HMRC each month and the wizard will help companies weed out redundant records. The wizard produces an employee readiness report that allows both the payroll manager and the employee to check the data, and the software will highlight fields that need to be fixed before an RTI submission is made.

Pegasus, too, has a similar RTI Data Validator that is available for £100 to users of Opera II and Opera 3 Payroll applications.

That’s the response from the big vendors. On behalf of smaller companies, 12Pay’s Tom McClelland pointed out, “In terms of data cleansing, I’m not aware that HMRC have said anything that’s much different - it’s just they’re banging on about it more now.

“We just do the same tests we have always done, because the RTI data quality requirements are not that different from the old payroll accreditation tests. Maybe we’ve missed a marketing opportunity.”

In McClelland’s view, users’ own data quality may not be the crucial factor when the submissions still flooding into HMRC after 6 April. 12pay has already encountered problems during the pilot scheme with reconciliations between the data held by HMRC on amounts declared on RTI submissions and amounts paid by employers. And he also thinks extraneous data items like the Bacs hash code and the “normal weekly hours” fields will generate more anomalies and queries than the tax department can handle.

“They’ve thrown the kitchen sink at the specifications to cope with universal credit, and in my opinion that isn’t going to work. Think about how careful employers and normal payroll bureaux are about collecting information that doesn’t affect how people get paid.”

Tags:

Replies (7)

Please login or register to join the discussion.

avatar
By adoggett
28th Mar 2013 12:59

RTI

I am not sure RTI will work.. Too much too soon.. You cannot expect small business's to send in weekly reports.. What about holidays, sickness, computer malfunctions..

Thanks (1)
avatar
By kfh
28th Mar 2013 14:27

Reducing red tape

Another piece of legislation to reduce the workload on small business!

 

Thanks (1)
avatar
By P2
28th Mar 2013 14:41

to add to remarks made by adogett..

What about snow, powercuts, people who don't want to be forced to file by internet, rural areas with no broadband coverage, good fridays, bank holidays, Saturdays, Sundays, etcetera etcetera?

Thanks (0)
avatar
By seonaid anderson
28th Mar 2013 15:36

Holidays

Yup , I'm starting RTI with a few days off on leave ( school holidays not strop!). Cover arranged and "trained" but very nervous of making mistakes which will be hard  to unwind so returns unlikely to go in before I get back to work. Not a great start to be hoping system seizes up in the first few days despite HMRC confidence, nor to be delaying my own payroll processing, until I return.

Thanks (0)
avatar
By Robert Hurn
28th Mar 2013 16:44

Why Weekly?

Would it not be better if filing were monthly as per the last minute concession for small employers until 5 October 2013?  I cannot see how HMRC will receive weekly information and pass it to the benefits office for them to amend benefits before the next weekly payroll is run.  They will be permanently behind the curve.  Far better to have one monthly filing as we do on CIS and give employers a sporting chance of complying.

Thanks (0)
Chris M
By mr. mischief
31st Mar 2013 20:58

Not that worried

I am not that worried about the impact of RTI on my client base.  This is because I am confident the overload of data will bring HMRC to its knees.  The pilot:

1.  Does not, and cannot, test the volume impact on the poorest quality HMRC staff.

2.  Is a self-selecting sample for large and small companies alike.

 

I'll explain what I meant in point 2 with reference to a previous job where accurate payroll processing for nearly 1,000 staff came under me.  When the company was restructuiring this was a pain in the butt[***] with the sorts of data integrity issues mentioned in the main post.  Other years it was nice as pie with only the occasional hassle over bonus payments and the like.

Now suppose you were me and HMRC invited me to sign up to the pilot.

1.  Do I sign up in a restructure year?  NO WAY I have enough on my plate as it is!

2.  In another year?  Yes probably.  I get an early look at the system and so does my IT department, so when go live day comes around life carries on being nice as pie.

Up and down the country people like me will have self-selected a very favourble data set on to the pilot.

Thanks (0)
avatar
By Jenny Bracken
03rd Apr 2013 12:43

RTI - BASDA comment from Alex Rowson, Chair of HR & Payroll SIG

Notwithstanding the fact that pilot employer’s have hand-picked themselves and are therefore more likely to have ‘clean’ data, HMRC have said that with nearly 6 million employees being submitted on a regular basis through RTI the level of mismatches and manual reconciliations required is at a 13 month low.

The main advantage of RTI is that rather than have a single end-of-year reconciliation process, mismatches will be picked up as and when an employee is added to an employer’s database and their details submitted when they are first paid, and there have already been many instances of incorrect NI numbers that have been used for years being corrected as a result of NINO verifications being performed on every employees’ FPS submission.

There will of course be a spike during April when the majority of employers first start to file RTI, but this will be no different to the volume of mismatches HMRC will see when the 2012-2013 end-of-year filing reconciliation is performed in May.

Hopefully employers will have cleaned their data before submitting their 2012-2013 end of year returns.

Thanks (0)