Three months have passed since the launch of real time information (RTI). Not everything is going as quite as smoothly as HMRC would have us believe, writes Chris Lake.
‘Software is not operating correctly’… ‘HMRC staff seem to have had very little training and are unable to help with queries’... ‘Several tax code issues’...
Despite reassurances from HMRC in recent press releases on RTI, an EY survey of 35 UK employers paints a somewhat different picture, as the quotes above illustrate. With the majority of employers operating under RTI from April 2013, now is a good time to review the transition and evaluate progress to date.
Talking to those employers who have gone through the process and asking them about their experiences provides an interesting insight into the introduction of the new system. The results of our survey suggest that there are a number of teething problems. 50% of employers who responded to the survey indicated that they were facing challenges in their operation of RTI, or with their preparations for RTI where they were not operating the new rules yet.
One of the main challenges employers experienced centred on lack of clarity in HMRC guidance and inadequate support, leading to a poor understanding of the system. Despite a promising start, with employers reporting positive experiences during the pilot scheme, problems seem to have subsequently emerged. Some employers felt that the HMRC staff they were dealing with seemed to lack adequate training which suggests that perhaps with clearer guidance and more comprehensive preparation of staff, the transition to RTI could have been smoother.
Eight employers also reported that they experienced software problems. These included the submission format not accepting foreign tax credits and software not being aligned properly with HMRC’s requirements. This suggests that some software providers were unable to meet the very tight timescales and late adjustments introduced to RTI, particularly as HMRC has continued to make frequent announcements over recent months making changes to specific aspects of RTI, including the ‘on or before’ rules, and issues relating to national insurance numbers.
According to our survey, HMRC errors have also been a prominent issue for employers. Employers reported that HMRC has, in some cases, issued incorrect BR tax codes where employees were transferred intragroup. Whilst errors such as this are ultimately the responsibility of HMRC, a general sense-check by employers would help to minimise the risk of the worst-case scenarios of employees being underpaid.
A number of employers reported issues with balancing payments they have recorded against HMRC’s records, so that balances are showing as owing by the employer as opposed to being balanced. One of the more alarming comments was that HMRC seem to have ‘missed’ a full payment submission filed during the RTI pilot phase and are now asking for an earlier year update.
So, looking forward, how should employers manage their risks effectively? HMRC has offered a ‘light-touch’ approach on penalties for this year, but employers must be aware that the penalty rules from April 2014 could penalise the unwary. With the additional burdens of auto-enrolment, payroll, HR and tax departments have their work cut out. It is likely that the problems highlighted above do not cover all of the issues experienced under RTI thus far. Employers should continue to closely monitor their payroll function over the next six months and seek to iron out all issues before the penalty regime kicks in.
Three months have passed since the launch of real time information (RTI). Not everything is going as quite as smoothly as HMRC would have us believe, writes Chris Lake.
‘Software is not operating correctly’… ‘HMRC staff seem to have had very little training and are unable to help with queries’... ‘Several tax code issues’...
Despite reassurances from HMRC in recent press releases on RTI, an EY survey of 35 UK employers paints a somewhat different picture, as the quotes above illustrate. With the majority of employers operating under RTI from April 2013, now is a good time to review the transition and evaluate progress to date.
Talking to those employers who have gone through the process and asking them about their experiences provides an interesting insight into the introduction of the new system. The results of our survey suggest that there are a number of teething problems. 50% of employers who responded to the survey indicated that they were facing challenges in their operation of RTI, or with their preparations for RTI where they were not operating the new rules yet.
One of the main challenges employers experienced centred on lack of clarity in HMRC guidance and inadequate support, leading to a poor understanding of the system. Despite a promising start, with employers reporting positive experiences during the pilot scheme, problems seem to have subsequently emerged. Some employers felt that the HMRC staff they were dealing with seemed to lack adequate training which suggests that perhaps with clearer guidance and more comprehensive preparation of staff, the transition to RTI could have been smoother.
Eight employers also reported that they experienced software problems. These included the submission format not accepting foreign tax credits and software not being aligned properly with HMRC’s requirements. This suggests that some software providers were unable to meet the very tight timescales and late adjustments introduced to RTI, particularly as HMRC has continued to make frequent announcements over recent months making changes to specific aspects of RTI, including the ‘on or before’ rules, and issues relating to national insurance numbers.
According to our survey, HMRC errors have also been a prominent issue for employers. Employers reported that HMRC has, in some cases, issued incorrect BR tax codes where employees were transferred intragroup. Whilst errors such as this are ultimately the responsibility of HMRC, a general sense-check by employers would help to minimise the risk of the worst-case scenarios of employees being underpaid.
A number of employers reported issues with balancing payments they have recorded against HMRC’s records, so that balances are showing as owing by the employer as opposed to being balanced. One of the more alarming comments was that HMRC seem to have ‘missed’ a full payment submission filed during the RTI pilot phase and are now asking for an earlier year update.
So, looking forward, how should employers manage their risks effectively? HMRC has offered a ‘light-touch’ approach on penalties for this year, but employers must be aware that the penalty rules from April 2014 could penalise the unwary. With the additional burdens of auto-enrolment, payroll, HR and tax departments have their work cut out. It is likely that the problems highlighted above do not cover all of the issues experienced under RTI thus far. Employers should continue to closely monitor their payroll function over the next six months and seek to iron out all issues before the penalty regime kicks in.
