HMRC’s Real Time Information (RTI) system still does not reflect PAYE information in real time, according to accountants.
This is just one of the technical problems that accountants have experienced with the £270 million RTI system, which went live over a year ago.
The RTI system is supposed to automatically update employees’ tax records so that HMRC calculates tax with the most up-to-date and accurate employment information. However, HMRC has forecast that more citizens will have overpaid or underpaid tax in 2013-14 (5.5 million) compared with the previous year (5.2 million) when the system was not yet live.
Paul Aplin, Institute of Chartered Accountants in England and Wales (ICAEW) Tax Faculty Technical Committee chair, said: “The main problems have been over disputed payments where the employer has submitted an RTI return showing the PAYE due and HMRC has then pursued a different amount of tax.
"This has been exacerbated by the fact that the PAYE ‘dashboard’ employers can view is not updated ‘real time’ as you would expect from a system called RTI, but only a couple of times a month. As a result of discussions with representative bodies including ICAEW the dashboard information has been significantly improved, though it is still not ‘real time’.”
HMRC said that it is a normal aspect of the 70-year-old PAYE system to have citizens overpaying or underpaying tax, insisting that the system records information in real time.
A spokesperson for HMRC said: “Systems are not updated twice monthly as information is recorded in real time.”
However, the spokesperson added: “We do calculate the charges employers pay us on the 5th day after the end of the tax month and update the calculation on the 19th day of each month, which gives employers time to send in any amended returns which we then take into account.
“Over time we expect RTI and our digital transformation plans to improve the accuracy of tax codes during the year. This in turn should mean fewer employees will have either an under- or over-payments at the year end and that these will be smaller in value. It is, however, too early to tell at the moment if this is happening.”
Government Gateway issues
The system first suffered problems in November last year, when the department announced that “an IT change made to HMRC’s systems” meant that incorrect amounts and methods of payments, as well as duplicate payments, showed up on accountants’ screens. The problem was rectified in January this year.
HMRC suffered several more problems where customers owed more tax than expected in several tax months and in April the system came to a standstill as accountants were unable to upload information and reported receiving thousands of automated emails in error.
HMRC said the issue in April was due to a problem with the government’s digital services and the Government Gateway, which accountants and employers use to upload their information onto RTI. Once HMRC processes PAYE submissions, it sends validation responses back through the gateway and expects a success message from the Gateway to confirm receipt. On this occasion, HMRC did not receive a response from the Gateway, so it continued to send messages to the accountant or employer repeatedly.
A spokesperson said: “This was an issue with the Government Gateway not the RTI systems, which resulted in delays to our normal ‘success’ and ‘failure’ responses. In addition to delays in receiving success and failure messages, some of employers may also have received multiple responses during this period.
Meanwhile, writing on an online forum, one accountant revealed that after speaking to an HMRC advisor following a problem, he learnt that RTI “cannot cope with the fact that YTDs [Year-To-Date] have been submitted during the year.
“This is a widespread problem on a large scale and they are snowed under with dealing with it,” he said.
To solve the problem, he added, HMRC was carrying out a Disputed Charge Process, which is a manual process to rectify incorrect figures.
“It seems like it isn’t just me dealing with this trauma. The technical person admitted it was an RTI glitch,” the accountant said.
Aplin, who is also a tax partner at A C Mole and Sons, Somerset, said that although he had found the RTI system relatively straightforward to use, that “there are still mismatch problems and my feeling is that part of this is down to design – and will thus be resolved. That lack of a fully real-time dashboard will continue to cause problems until it is addressed, though HMRC has made some changes recently that have improved, but not resolved, the situation.”
HMRC made aU-turn on its position on fining companies who were not RTI compliant, earlier this year.
RTI error rate will affect low-paid workers
RTI information is also fed through to the Department for Work and Pensions (DWP), which uses it to dictate how much Universal Credit low paid workers are entitled to.
When the system was announced, trade union Unison expressed concerns over how technical and human errors will affect how low-paid workers dependant on Universal Credit payments would be affected. Universal credit is very sensitive to income level and for benefits to be correct it is essential that RTI pay reporting information is accurate.
Sampson Low, head of Policy at Unison, said: “We have submitted evidence to the select committee and others and warned from the outset that the RTI system has too high an error rate either due to coding problems from HMRC or employee data entry problems. It will cause issues for low-paid workers, particularly in the care sector, with zero-hour contracts and whose hours vary regularly, as they would struggle to know that they were always getting the right Universal Credit amount the next month.
“It wouldn’t always be easy for them to understand why Universal Credit would be moving up and down in the following months.”
He added: “There are already large problems with payslips as it is in terms of hourly rates.”
Last year MPs on the Public Accounts Committee (PAC) found thatRTI lacked full disaster recovery arrangements, which could result in delayed payments for Universal Credit claimants.
“There will always be end-of-year reconciliation due to the way PAYE works. Most people pay the right tax throughout the year, but there will always be a small percentage of the 41 million people in PAYE who have underpayments or overpayments at year end. This could be because they have moved jobs, received a number of different sources of income or received benefits-in-kind that were only reported at the end of the year,” a spokesperson for HMRC said.
“We are aware that some employers have difficulty in reconciling what they think is due to what HMRC think is due, [but] the number of disputed charges is very small. To help employers we have improved our guidance, especially information you must get right when running your payroll; improved our IT to prevent the most frequent errors from generating a duplicate employment on our systems and put in place processes to correct as soon as possible those that do get through.”