This site uses cookies; by continuing to use our site you agree to our use of cookies. More details in our privacy policy. Close

 

INTERVIEW: HMRC in the hot seat 24 July 2014

With RTI being fully operational for a over year now, Martin Kornacki caught up with Ruth Owen in May, the HMRC director general responsible for RTI, to ask her some tough questions about the reform

Martin Kornacki: From HMRC’s point of view, how has the first year of RTI gone?

Ruth Owen: I think it’s been a successful year. Over the year we got 31m Full Payment Submissions (FPS), with data quality at 99.5%, and 633m payments in total. Compliance levels are at record levels, with 99.5% of employments coming in on time, and at scheme level at 96% of the 1.8m schemes. So while recognising that this year was always going to be when we learned about how RTI would operate at scale – and there have been a small minority of people who have had difficulties – overall it feels that we’ve introduced a massive change into the payroll world and HMRC, and it’s bedding in well.

In particular, the end of year experience has been really interesting. We certainly saw people making their final FPS rather than end of year submission much quicker, so by April 19 we had 88% of returns in, and we reconciled them straight away. While the phones have still been busy at HMRC, most of the calls were reassurance calls. People were phoning up to say, “I think I’ve done it, is that it? Is there anything else
I need to do?” which seems to me to stress the point we’ve always been making that actually end of year is now a straightforward process, and it removes the end of year drudgery for businesses and their agents. Additionally we’re already starting to plug that information into tax credits renewals as an example of how we’re already deploying RTI data within HMRC.

MK: Some payrolls seem to be plagued by reconciliation issues and there are concerns that HMRC’s debt management is chasing in disputed cases. What is your view on this?

RO: There have been a notable number, albeit a small minority, of schemes that have disputed the amount of tax that’s due compared with what we say is due. We’ve published best practice on this. We’re still dealing with a large number of those cases. They’re incredibly complex to diagnose, but I absolutely recognise that if you’re one of those employers or agents, it’s frustrating because you think you’ve done your best to complete all your payroll duties, and you can’t understand why it is we’re thinking the tax reconciled is different from what you believe to be true.

It’s a key point that where we recognise that a case is under dispute we put a halt on debt management action. I’ve tried to communicate this through rep bodies and other stakeholders. I’ve heard the stories that debt management action is taken on something that they’re adamant is wrong, and if you dispute the charge we’ll actually halt action while we investigate. That’s quite critical to highlight.

The cases are very complex. Sometimes it’s like looking for a needle in a haystack when there’s a scheme with several thousand members, and you’re trying to find one line that doesn’t reconcile. So absolutely we’re in investigative mode, and we’ve tried to recognise customers’ experiences, and listened to feedback. It’s fair to acknowledge people’s frustrations about the Business Tax Dashboard – that’s not always showing the most up to date position. We’re hearing that feedback, and we’re looking at what we can do, because sometimes it isn’t either wrong or in dispute, it’s just timing in terms of when people look up their accounts and it hasn’t been updated with the latest payment.

MK: HMRC has outlined its RTI penalties timetable. How do you feel about rolling that out if some of the systems aren’t quite working entirely as they should?

RO: To recap, from October 14 late filing penalties will be brought in, and we’ve introduced the additional ability to report a reason for late filing, so lots of people who have a good reason won’t get penalised. And then we’ve given a full year until late payment penalties. Part of the rationale for that is we don’t want that getting muddled up with people who are still looking at reconciliation and disputed charges. So with a year to go I have full confidence those issues will be well bedded in and resolved before we get to penalties.

MK: Leading on from this when are the longer term benefits of RTI going to become visible to payroll, specifically a real time dashboard and real time tax codes?

RO: I can’t give you a specific date. We’ve heard the feedback on the Tax Dashboard and we’re strategically replacing that with your tax account, which is the single account for business online, and again that’s in pilot as we speak. I saw a beta version of that last week, and it’s looking in good shape. We recognise what we need to do to get that up to date so things like PAYE returns and payments are shown in real time. And the same with tax codes. I think gradually over the next year or so we’ll start to be deploying that more. I’ll contact you once I can give you a date when you’ll start to see that happen.

I’d say though that we’ve already started to make a difference – starters and leavers are actioned straight away, so PAYE records are in better shape then they’ve ever been before because we’re using RTI data. We already use that data for Universal Credit (UC) and that is ramping up at a gradual level. There are already people on UC whose benefit is being adjusted on a monthly basis based on their RTI returns, and similarly as we go through the tax credit renewal, which impacts six million people, we’re using their RTI feed rather than asking them what their earnings were for the previous year. Over the next year or so HMRC will be doing more to use that data, as will other government departments. I’ve heard colleagues from the Treasury and the Department for Work and Pensions talking recently about how RTI is now a government asset that we can use to reduce fraud and error, and for debt management, and I think your readers will start to see changes to the way we use it in the tax regime over the next year.

MK: What can be done about the issue of duplicate records that some have experienced?

RO: We’ve issued guidance on our website, but also we’ve worked really hard to try and stop duplicate records impacting on people’s tax. The system already spots duplicates being set up for obvious reasons, like if someone with the same name but slightly different payroll number or job code appears we quarantine them. While we’ve seen a number of duplicates, we feel we’ve managed all but about 5% of them internally within HMRC and stopped them triggering any tax codes. It’s something we need to continue to watch, and we acknowledge it’s something that’s frustrating for people.

MK: What impact has RTI had on tax fraud prevention?

RO: RTI gives us much greater visibility in the PAYE space. In tax and benefit fraud we’re working cross-government on fraud and error and debt strategy and, as mentioned, RTI gives us better data and intelligence on anyone who’s defrauding government.

MK: Is there any appetite within HMRC for merging Income Tax and National Insurance?

RO: That’s a government policy, and where we stand is we serve the government of the day, so where government may choose to merge tax and National Insurance then obviously that will be our job to administer it. What we have seen is some good administrative alignment in the budget – for example with Class 2 National Insurance being collected through self-assessment – that makes it much more straightforward for us to administer, and I hope it makes it much more straightforward for small businesses in particular to understand their responsibilities. Where possible we’ll align for administrative simplicity, but it’s for the government rather than HMRC to decide whether they want to go any further than that.

MK: RTI has been a huge reform for the industry. Does HMRC have any plans on the horizon that will affect payroll further?

RO: I’d like to bed in RTI first. There are still a couple of issues outstanding, and we’ve got to bring interest in this year and then penalties. I wouldn’t want to lay change upon change in the payroll space right now. I recognise everyone’s very busy with auto-enrolment as well. The headline from HMRC’s perspective is that the spread of our work into online and digital is probably the biggest change that people will see, not next week but certainly over coming months, and into 2015 we’ll also see a significant difference for businesses and also individuals as they start to access HMRC’s services online. We’ll be working on that, and also obviously we’ll be working with payroll professionals as well as individual users to ensure we get that right.

MK: Do you have any final message for readers of Payroll World?

RO: It’s something that I’ve said to a lot of people over the past few weeks, which is a massive thank you. We’ve transformed payroll and Pay As You Earn over the last 12 months, and a number of people in the payroll profession have helped HMRC immensely over that time and before that when we piloted. I hope people recognise that the scale of the change has been worthwhile, and I hope people recognise that we’ve continued to listen to feedback. I’m immensely grateful for everybody’s feedback on how it’s gone and how we can continue to improve and embed the new system.

This article first appeared in the June edition of Payroll World, for a subscription to the magazine click here

See also:

 

 

blog comments powered by Disqus

Poll

Is alignment of income tax and NICs a good idea?