Software tackles RTI data glitches
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.
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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.”
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AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.