Problems with data transfer between payroll systems at employers and HMRC are causing increasing frustration for businesses, while HMRC is too slow to respond to problems, with average resolution taking in excess of 12 months.
A report into RTI collection issues at HMRC found that regular errors occurred with employee data not being allocated to match the employers’ records, while small employers without an HMRC customer relationship managers (CRMs) find it hard to get a resolution to RTI queries and issues.
There are also problems as HMRC puts RTI cases on hold while its charge resolution team (CRT) works through backlogs, leaving employers and employees with potentially thousands of pounds ‘owed’ to HMRC, as they cannot process payments.
Worryingly, the HMRC charge resolution team gives an estimated timescale to resolve a case as in excess of 12 months, sometimes up to two years.
HMRC has been aware of RTI misallocation for a number of years, resulting in both incorrect charges against employers and potentially missed charges, creating a tax gap.
As with many of HMRC’s helplines, employers have great difficulty getting accurate and well-informed advice from the employer helpline.
‘With no view of the RTI data HMRC holds, this causes great frustration and time wasted for both employers and HMRC.
HMRC are called upon to provide ‘greater transparency about internal limitations of the RTI system’ that has been in place since April 2013.
One case study investigated a merger of two companies, which required moving payroll records from one to the other.
There was miscommunication throughout the merger, leading to HMRC guidance not being followed, showing a £6,000 difference in money owed on the government gateway.
However, when the data for the employees was confirmed on the two companies’ side prior to the transfer this was not matched up by HMRC.
This was challenged in 2022, with HMRC telling the company to pay the amount owed for future payments to be reduced. They were also told it could take up to two years for the dispute team at HMRC to resolve it.
Because of this one employee was put on a K tax code, with little help being offered by the HMRC help line apart from being sent to a HMRC technician as they ‘can see more information’.
The company was expecting a resolution to this by the end of 2024 but when the report was completed it had still not heard back from HMRC.
A review of the whole RTI system by HMRC, including the possibility of expansion of the system and allowing employers to deal directly with HMRC about their employee’s issues with the tax authority is necessary.
Employers and agents should also be granted access to their RTI submissions so that mistakes can be identified quicker, as well as having the ability to submit changes for approval to HMRC.
