HMRC made ‘significant progress’ during 2010/11 in stabilising the administration of PAYE, but completion of that work is ‘an essential foundation’ for the introduction of real time information (RTI) and planned staffing reductions, the National Audit Office said in its report on HMRC's accounts.
The CIOT’s Low Incomes Tax Reform Group warned that there could be ‘grave consequences’ if the problems with the PAYE system are not ‘dealt with’ before RTI, requiring employers to provide data to HMRC each month, is introduced.
Andrews: 'It will be essential for all old disputes and PAYE data problems to be out of the way by the time real-time information comes on stream.'
‘HMRC’s failure to clear past years’ debts and repayments promptly through the PAYE system has led to hardship for significant numbers of people and has badly dented public confidence in the department,’ said LITRG Chairman John Andrews.
‘The new system will be relied upon to determine not only an employee’s tax liability but also their universal credit entitlement. It will be essential for all old disputes and PAYE data problems to be out of the way by the time real-time information comes on stream. Any unresolved problems could have grave consequences for the unrepresented on low incomes and make the universal credit delivery fraught with difficulty.’
By the end of March 2011 HMRC had successfully reconciled the ‘vast majority’ of records available for automated reconciliation for 2008/09 and 2009/10, and processed the associated overpayments or underpayments of tax, the NAO said.
‘The Department will now have to deliver on its plans to manually clear the records relating to 2008/09 and 2009/10 which cannot be processed automatically.’
Stabilisation
The phased release of the automated reconciliation functionality provided by the National Insurance and PAYE Service (NPS) implemented in June 2009 led HMRC to defer reconciliation of about 39 million taxpayer records for 2008/09, delaying by more than a year the identification of over and underpayments.
The NAO recalled that the phased release also limited HMRC’s ability to deal with a backlog of almost 18 million cases pre-dating NPS, contributing to HMRC ‘having to forego the recovery of underpayments relating to 2006/07 and earlier years assessed as uneconomic to collect or out of time’.
‘While the Department has lost the opportunity to recover underpayments for the 2006/07 tax year, it plans to complete the reconciliation and process the repayment of tax overpaid in the 2003/04 to 2007/08 tax years by the end of 2012’ the NAO said.
Amyas Morse, Head of the National Audit Office, said: ‘There is clear evidence that HMRC is beginning to stabilise its administration of PAYE, following the disruption to processing which flowed from the introduction of its new computer system.
‘However, stabilisation will not be fully complete until 2013, according to the Department, and it will need to deliver its plan to improve PAYE data quality if it is to realise the benefits of the new system and prepare for the move to real time information.’
HMRC made ‘significant progress’ during 2010/11 in stabilising the administration of PAYE, but completion of that work is ‘an essential foundation’ for the introduction of real time information (RTI) and planned staffing reductions, the National Audit Office said in its report on HMRC's accounts.
The CIOT’s Low Incomes Tax Reform Group warned that there could be ‘grave consequences’ if the problems with the PAYE system are not ‘dealt with’ before RTI, requiring employers to provide data to HMRC each month, is introduced.
Andrews: 'It will be essential for all old disputes and PAYE data problems to be out of the way by the time real-time information comes on stream.'
‘HMRC’s failure to clear past years’ debts and repayments promptly through the PAYE system has led to hardship for significant numbers of people and has badly dented public confidence in the department,’ said LITRG Chairman John Andrews.
‘The new system will be relied upon to determine not only an employee’s tax liability but also their universal credit entitlement. It will be essential for all old disputes and PAYE data problems to be out of the way by the time real-time information comes on stream. Any unresolved problems could have grave consequences for the unrepresented on low incomes and make the universal credit delivery fraught with difficulty.’
By the end of March 2011 HMRC had successfully reconciled the ‘vast majority’ of records available for automated reconciliation for 2008/09 and 2009/10, and processed the associated overpayments or underpayments of tax, the NAO said.
‘The Department will now have to deliver on its plans to manually clear the records relating to 2008/09 and 2009/10 which cannot be processed automatically.’
Stabilisation
The phased release of the automated reconciliation functionality provided by the National Insurance and PAYE Service (NPS) implemented in June 2009 led HMRC to defer reconciliation of about 39 million taxpayer records for 2008/09, delaying by more than a year the identification of over and underpayments.
The NAO recalled that the phased release also limited HMRC’s ability to deal with a backlog of almost 18 million cases pre-dating NPS, contributing to HMRC ‘having to forego the recovery of underpayments relating to 2006/07 and earlier years assessed as uneconomic to collect or out of time’.
‘While the Department has lost the opportunity to recover underpayments for the 2006/07 tax year, it plans to complete the reconciliation and process the repayment of tax overpaid in the 2003/04 to 2007/08 tax years by the end of 2012’ the NAO said.
Amyas Morse, Head of the National Audit Office, said: ‘There is clear evidence that HMRC is beginning to stabilise its administration of PAYE, following the disruption to processing which flowed from the introduction of its new computer system.
‘However, stabilisation will not be fully complete until 2013, according to the Department, and it will need to deliver its plan to improve PAYE data quality if it is to realise the benefits of the new system and prepare for the move to real time information.’
