In my Tax Journal article Has the RTI dream materialised?, I explained that the original dream of RTI – of PAYE being accurate, tax collection being more efficient and contact being reduced between taxpayers and HMRC – has not yet materialised. This is because HMRC is not using the data it receives efficiently in real time.
In view of this, KPMG’s pre-Autumn Statement submissions to the chancellor suggested that significant and urgent investment was needed in HMRC’s processing and back-end software systems to produce the operational efficiencies initially envisaged for the RTI project.
A letter from the financial secretary, David Gauke MP, has now confirmed that the chancellor has accepted a recommendation made by the Office of Tax Simplification (in its Review of the competitiveness of the UK tax administration) that: ‘HMRC should conduct a post-implementation review into RTI and whether full “on or before” reporting is necessary and what further scope there is to extend/harmonise easements for small employers’. Harmonisation of a number of easements by allowing reporting by the 19th following the end of the tax month would be a simplification. Will HMRC be so bold as to recommend monthly reporting for all?
We do not know the full terms of reference for this review, but let us hope that HMRC grasps this opportunity to improve RTI, with the review covering: the original cost and benefit estimates; better use of the RTI data; better communication with taxpayers; and improvements to HMRC’s back end systems, to realise benefits for both HMRC and taxpayers.
One such improvement would hopefully be to amend the earlier year update (EYU) process. Employers and their agents are sometimes asked by HMRC to submit an EYU to correct the data HMRC holds. The employer or their agent cannot just submit the correct information; they have to submit an adjustment to the figures that HMRC holds, and therein lies the flaw. The employer doesn’t know what figures HMRC holds. The process would be more efficient if the employer had the option of submitting the correct data. HMRC systems could then automatically calculate the adjustment.
Another improvement would be more frequent communication with taxpayers, agents and software developers. For example, on 9 October 2015, HMRC published a statement regarding incorrect 2013/14 tax calculations (P800) which said: ‘In the meantime, those customers who think their 2013/14 P800 may be wrong should contact our helplines for further advice before making repayments or cashing cheques.’ To date, no further news has been issued by HMRC. Are any taxpayers still holding on to cheques? HMRC also requested that employers and their agents should not submit EYUs and have told employers with disputed charges that they would get back to them in three months. It appears that further updates have not been forthcoming on either of these issues.
This review presents HMRC with the opportunity to generate the benefits envisaged in the original consultation. I hope HMRC will consult widely on achieving these aims. In the short term, HMRC should improve its communications with taxpayers, software developers and agents and amend the EYU process.
In my Tax Journal article Has the RTI dream materialised?, I explained that the original dream of RTI – of PAYE being accurate, tax collection being more efficient and contact being reduced between taxpayers and HMRC – has not yet materialised. This is because HMRC is not using the data it receives efficiently in real time.
In view of this, KPMG’s pre-Autumn Statement submissions to the chancellor suggested that significant and urgent investment was needed in HMRC’s processing and back-end software systems to produce the operational efficiencies initially envisaged for the RTI project.
A letter from the financial secretary, David Gauke MP, has now confirmed that the chancellor has accepted a recommendation made by the Office of Tax Simplification (in its Review of the competitiveness of the UK tax administration) that: ‘HMRC should conduct a post-implementation review into RTI and whether full “on or before” reporting is necessary and what further scope there is to extend/harmonise easements for small employers’. Harmonisation of a number of easements by allowing reporting by the 19th following the end of the tax month would be a simplification. Will HMRC be so bold as to recommend monthly reporting for all?
We do not know the full terms of reference for this review, but let us hope that HMRC grasps this opportunity to improve RTI, with the review covering: the original cost and benefit estimates; better use of the RTI data; better communication with taxpayers; and improvements to HMRC’s back end systems, to realise benefits for both HMRC and taxpayers.
One such improvement would hopefully be to amend the earlier year update (EYU) process. Employers and their agents are sometimes asked by HMRC to submit an EYU to correct the data HMRC holds. The employer or their agent cannot just submit the correct information; they have to submit an adjustment to the figures that HMRC holds, and therein lies the flaw. The employer doesn’t know what figures HMRC holds. The process would be more efficient if the employer had the option of submitting the correct data. HMRC systems could then automatically calculate the adjustment.
Another improvement would be more frequent communication with taxpayers, agents and software developers. For example, on 9 October 2015, HMRC published a statement regarding incorrect 2013/14 tax calculations (P800) which said: ‘In the meantime, those customers who think their 2013/14 P800 may be wrong should contact our helplines for further advice before making repayments or cashing cheques.’ To date, no further news has been issued by HMRC. Are any taxpayers still holding on to cheques? HMRC also requested that employers and their agents should not submit EYUs and have told employers with disputed charges that they would get back to them in three months. It appears that further updates have not been forthcoming on either of these issues.
This review presents HMRC with the opportunity to generate the benefits envisaged in the original consultation. I hope HMRC will consult widely on achieving these aims. In the short term, HMRC should improve its communications with taxpayers, software developers and agents and amend the EYU process.
