HMRC is facing mounting criticism of its Real Time Information (RTI) after the department was forced to admit that thousands of people had been sent incorrect tax bills, with senior tax figures calling for a review of the system
This comes on the back of an apology by HMRC for the P800 income tax errors issued yesterday. In a statement HMRC said that a number of incorrect 2013-14 tax calculations (P800) and payable orders were issued in a three-week period from 15 September and said it was urgently investigating what had gone wrong. The department indicated that ‘thousands’ were affected, and said the errors were down to mistakes made by employers in filing final payment statements for the 2013/14 tax year.
Natalie Miller, ATT president, said the association is calling for an urgent review of the RTI system to ensure that it is fit for purpose, and that external agencies should be asked to contribute their views and experience.
‘If, as HMRC’s reported comments suggest, the particular problem arose because employers had failed to send in final payment statements for the full 2013/2014 tax year, that suggests two things. Firstly, that the process is simply too complex for employers to understand. Secondly, that either HMRC know the information to be incomplete and are failing to address this before placing reliance on the information, or HMRC do not know the information is incomplete, which raises the equally worrying prospect that the system cannot identify when important information is missing,’ Miller said.
KPMG UK tax director, Steve Wade, says that issues with the HMRC’s own systems may also have played a significant part in the current problems.
‘These systems issues are causing so called “employer errors”, which is where the data supplied by the employer is not processed by HMRC systems as expected. Sometimes this can be due to bad data being supplied but equally it can be due to errors in HMRC systems which were not designed to deal with all the complexities of PAYE.
‘The upshot for employers and employees is that they find that the PAYE tax and national insurance contributions that have been paid do not match those calculated by HMRC, despite their providing the information as requested. As a result, they now face uncertainty over whether they have paid the right amount of tax.’
As well as ‘significant and urgent investment’ in the processing and back end software systems at HMRC, Wade said there needed to be more and quicker feedback to employers’ agents and software developers on issues as they arise. He said that HMRC recently wrote to employers who they believe are in dispute with over previous reconciliations and similar RTI issues, saying they could not expect a response for three months.
Both Miller and Wade raised concerns that the difficulties with RTI could be compounded once the Department for Work and Pensions starts to roll out the Universal Credit scheme, which will draw on information held by HMRC and collected via RTI.
Wade said: ‘At the moment, RTI just does not seem to be delivering information that is real. What we need is a thorough investigation of what has happened by a team which includes not just HMRC personnel but external specialists. Only that will give the necessary degree of confidence in the system that is vital for everyone who depends upon it.’