It’s two weeks to the day to the end of the tax ear as I write this, the second under Real Time Information (RTI) - if you forget there was a live pilot that was supposed to ensure that the national roll out went smoothly.
It’s less than a week until civil servants go into pre-election purdah and retreat behind their desks until we have a new government in place, which may not be until the end of May.
During purdah the first set of penalties for the smallest PAYE schemes will be issued, as HMRC confirmed in Employer Bulletin February 2015 Issue 52 that these would be issued in late May alongside the penalties for the January - March 2015 quarter for schemes with 50 or more employees.
It is not clear why there is such a delay after the quarter end date on 5 April before the penalties are issued, but then there are a number of areas of the RTI compliance regime that lack clarity after the HMRC press release on 17 February 2015.
In this article we’ll explore what has been announced over recent weeks and what this means for employers as they enter their third year with RTI now firmly business as usual.
Employer Bulletin 52
On 16 February HMRC published Employer Bulletin 52. It contained articles on: • Payment date - aiming to clarify that the payment date field must be the contractual payment date even that is a non-banking day
• Avoiding duplicate records, which HMRC ask you to do by avoiding sending them accurate data such as amended start and leave dates (I kid you not, yes, I know the RTI was supposed to be all about accurate data)
• A whole article about the compliance regime for small employers (that made no mention of the concession that was to be announced the next day).
Incidentally, 16 February saw the beginning of the national rollout of Universal Credit (UC) that would, for the first time, need to rely on earnings data sent ‘on or before the date of payment’ to ensure that the right earnings were included in the appropriate UC award period.
On 17 February we read that the RTI penalty regime was all but suspended (for a third time):
• A three-day tolerance to the on or before rule was to be introduced effective from March 2015 - the point at which schemes with 49 or fewer employees joined the late and non-filing penalty regime
• In order for all employees to be treated fairly the tolerance had to be backdated to October 2014, so large employers who had by now received penalties for the quarter to December could appeal if their full payment submissions (FPS) has been sent within three days of payment date
• Late payment penalties would not be automated but instead risk-assessed ie sent out manually only to persistent non-payers.
So why did such a press release need to be issued the day after the scheduled Employer Bulletin? Was it because, as I suspect, by then HMRC had calculated how many penalties were going to be issued to small employers for what many would consider minor transgressions and which would not be ideal mood music around election time? (Remember that back in 2010 the coalition came to power when HMRC were apologising for PAYE being in disarray and they promised RTI would be the solution).
So perhaps a quick calculation that a threeday tolerance would reduce the numbers significantly, move the penalty issue date to late May and any political damage could be avoided.
Of course it was what wasn’t said in the press release that was as important as what was said:
•Was the three-day tolerance just for March 2015, or from March onwards?
• Would generic warnings still be issued but not the penalties?
• Would penalties be issued to large employers for January and February that would also need to be appealed?
• How did a three-day tolerance sit with DWP who require total compliance with on or before and whom the day before had started to roll out UC nationally?
After a few hours of scratching our heads we pooled our collective resources and the RTI Stakeholder Group (that I chair) managed to establish from HMRC that:
• The tolerance was to run from March 2015 until 5 April 2016 (when small financial penalties may be scrapped anyway based on the current consultation)
• That GNS messages as well as penalties would not be issued if the 3-day tolerance was in point
• The large employers would also be able to appeal penalties for January and February if the three-day tolerance applied.
At the time we were promised that this clarity would be published by HMRC but as it has not been at this point and has been provided by an official source it seems entirely appropriate at this stage that employers and agents are aware what the RTI compliance regime is.
BACS hashing
Whilst this is undoubtedly good news for employers it is not for the DWP who do not want any shift away from the need to file ‘on or before’. They have been trying to promote the ‘BACS hashing is good practice’ message in advance of the rollout.
You may not be aware but only FPS entries with a BACS hash are passed to the DWP from HMRC with a validated payment confidence marker of one or two, which the DWP need in order to ensure that the UC award cannot be disputed as there is a clear audit trail of an amount and payer.
Any payment made by any other payment method than direct BACS with a Service User Number (SUN), for example internet banking or faster payments, does not have confidence level one or two traceability. So disputes with employees can abound as the FPS data may have been duplicated en route to the DWP.
Now that UC is rolling out to eight million employees, over time employers who do not pay by BACS may need to weigh that choice against the possibility of employee relation issues as they try to resolve benefit disputes with HMRC and the DWP as well as disputed charges.
And whilst we’re on disputed charges, it is a relief that HMRC decided that the state of the liability data on their accounting system would not support automated payment penalties. Some disputes have been ongoing since the start of the pilot in April 2012. For the many employers I talk to each week there seems to be no progress being made in resolving them or preventing them occurring in the first place.
HMRC announced the Accounting Web in early March the following statistics on duplicate employments (the main source of overstated liabilities):
“Since June 2014, HMRC has corrected duplicate employments on 112,000 employer schemes and corrected 1.3m duplicate employments relating to 628,000 individuals. HMRC is currently correcting 14,000 employer schemes covering 65,000-75,000 individuals on a monthly basis.”
It appears this is supposed to be reassuring. My view is that it is a damning indictment of the system design if RTI has still created 1.3 million duplicates in nine months.
(They had previously admitted to 420,000 in the first six months of RTI. So the problem is getting much worse, which is to be expected as the volume of individual employments increases. Despite the exhortation in the Employer Bulletin to stop sending accurate data to stop duplicates this is simply not possible with automated systems, or legal as we have to hold accurate date for employment law purposes and HMRC should have the same aim).
There will never be a time when start and leave dates do not need to be amended. That is the nature of the business world.
But if our concerns over penalties have dissipated a little over the last month that has been replaced on our worry list with the concerns over the accuracy of tax codes for 2015/16. I am hearing significant concern about:
Multiple codes issued on the same day that vary from K to D0 to BR. It’s not clear which, if any, are right as they are all dated the same day. In any case, many are just straight L codes that should be being uplifted by the P9X without a P9 being issued let alone three at once!
• Many codes being issued on a month one basis even though it is April
• Codes being received for employees who left many years ago pre the move to RTI so were never even on the alignment submission.
This is the first mass communication to the outside world using RTI data since the P800s were issued in June, which HMRC admitted had errors in them - twice. It again shows the poor standard of data that is being held centrally. And yet it is precisely this data that is to be used from next April to pre-populate SA returns and roll out a new business tax dashboard. It seems head girl Lin Homer has a lot of homework to do before then.
By Kate Upcraft
It’s two weeks to the day to the end of the tax ear as I write this, the second under Real Time Information (RTI) - if you forget there was a live pilot that was supposed to ensure that the national roll out went smoothly.
It’s less than a week until civil servants go into pre-election purdah and retreat behind their desks until we have a new government in place, which may not be until the end of May.
During purdah the first set of penalties for the smallest PAYE schemes will be issued, as HMRC confirmed in Employer Bulletin February 2015 Issue 52 that these would be issued in late May alongside the penalties for the January - March 2015 quarter for schemes with 50 or more employees.
It is not clear why there is such a delay after the quarter end date on 5 April before the penalties are issued, but then there are a number of areas of the RTI compliance regime that lack clarity after the HMRC press release on 17 February 2015.
In this article we’ll explore what has been announced over recent weeks and what this means for employers as they enter their third year with RTI now firmly business as usual.
Employer Bulletin 52
On 16 February HMRC published Employer Bulletin 52. It contained articles on: • Payment date - aiming to clarify that the payment date field must be the contractual payment date even that is a non-banking day
• Avoiding duplicate records, which HMRC ask you to do by avoiding sending them accurate data such as amended start and leave dates (I kid you not, yes, I know the RTI was supposed to be all about accurate data)
• A whole article about the compliance regime for small employers (that made no mention of the concession that was to be announced the next day).
Incidentally, 16 February saw the beginning of the national rollout of Universal Credit (UC) that would, for the first time, need to rely on earnings data sent ‘on or before the date of payment’ to ensure that the right earnings were included in the appropriate UC award period.
On 17 February we read that the RTI penalty regime was all but suspended (for a third time):
• A three-day tolerance to the on or before rule was to be introduced effective from March 2015 - the point at which schemes with 49 or fewer employees joined the late and non-filing penalty regime
• In order for all employees to be treated fairly the tolerance had to be backdated to October 2014, so large employers who had by now received penalties for the quarter to December could appeal if their full payment submissions (FPS) has been sent within three days of payment date
• Late payment penalties would not be automated but instead risk-assessed ie sent out manually only to persistent non-payers.
So why did such a press release need to be issued the day after the scheduled Employer Bulletin? Was it because, as I suspect, by then HMRC had calculated how many penalties were going to be issued to small employers for what many would consider minor transgressions and which would not be ideal mood music around election time? (Remember that back in 2010 the coalition came to power when HMRC were apologising for PAYE being in disarray and they promised RTI would be the solution).
So perhaps a quick calculation that a threeday tolerance would reduce the numbers significantly, move the penalty issue date to late May and any political damage could be avoided.
Of course it was what wasn’t said in the press release that was as important as what was said:
•Was the three-day tolerance just for March 2015, or from March onwards?
• Would generic warnings still be issued but not the penalties?
• Would penalties be issued to large employers for January and February that would also need to be appealed?
• How did a three-day tolerance sit with DWP who require total compliance with on or before and whom the day before had started to roll out UC nationally?
After a few hours of scratching our heads we pooled our collective resources and the RTI Stakeholder Group (that I chair) managed to establish from HMRC that:
• The tolerance was to run from March 2015 until 5 April 2016 (when small financial penalties may be scrapped anyway based on the current consultation)
• That GNS messages as well as penalties would not be issued if the 3-day tolerance was in point
• The large employers would also be able to appeal penalties for January and February if the three-day tolerance applied.
At the time we were promised that this clarity would be published by HMRC but as it has not been at this point and has been provided by an official source it seems entirely appropriate at this stage that employers and agents are aware what the RTI compliance regime is.
BACS hashing
Whilst this is undoubtedly good news for employers it is not for the DWP who do not want any shift away from the need to file ‘on or before’. They have been trying to promote the ‘BACS hashing is good practice’ message in advance of the rollout.
You may not be aware but only FPS entries with a BACS hash are passed to the DWP from HMRC with a validated payment confidence marker of one or two, which the DWP need in order to ensure that the UC award cannot be disputed as there is a clear audit trail of an amount and payer.
Any payment made by any other payment method than direct BACS with a Service User Number (SUN), for example internet banking or faster payments, does not have confidence level one or two traceability. So disputes with employees can abound as the FPS data may have been duplicated en route to the DWP.
Now that UC is rolling out to eight million employees, over time employers who do not pay by BACS may need to weigh that choice against the possibility of employee relation issues as they try to resolve benefit disputes with HMRC and the DWP as well as disputed charges.
And whilst we’re on disputed charges, it is a relief that HMRC decided that the state of the liability data on their accounting system would not support automated payment penalties. Some disputes have been ongoing since the start of the pilot in April 2012. For the many employers I talk to each week there seems to be no progress being made in resolving them or preventing them occurring in the first place.
HMRC announced the Accounting Web in early March the following statistics on duplicate employments (the main source of overstated liabilities):
“Since June 2014, HMRC has corrected duplicate employments on 112,000 employer schemes and corrected 1.3m duplicate employments relating to 628,000 individuals. HMRC is currently correcting 14,000 employer schemes covering 65,000-75,000 individuals on a monthly basis.”
It appears this is supposed to be reassuring. My view is that it is a damning indictment of the system design if RTI has still created 1.3 million duplicates in nine months.
(They had previously admitted to 420,000 in the first six months of RTI. So the problem is getting much worse, which is to be expected as the volume of individual employments increases. Despite the exhortation in the Employer Bulletin to stop sending accurate data to stop duplicates this is simply not possible with automated systems, or legal as we have to hold accurate date for employment law purposes and HMRC should have the same aim).
There will never be a time when start and leave dates do not need to be amended. That is the nature of the business world.
But if our concerns over penalties have dissipated a little over the last month that has been replaced on our worry list with the concerns over the accuracy of tax codes for 2015/16. I am hearing significant concern about:
Multiple codes issued on the same day that vary from K to D0 to BR. It’s not clear which, if any, are right as they are all dated the same day. In any case, many are just straight L codes that should be being uplifted by the P9X without a P9 being issued let alone three at once!
• Many codes being issued on a month one basis even though it is April
• Codes being received for employees who left many years ago pre the move to RTI so were never even on the alignment submission.
This is the first mass communication to the outside world using RTI data since the P800s were issued in June, which HMRC admitted had errors in them - twice. It again shows the poor standard of data that is being held centrally. And yet it is precisely this data that is to be used from next April to pre-populate SA returns and roll out a new business tax dashboard. It seems head girl Lin Homer has a lot of homework to do before then.
By Kate Upcraft
