HMRC launches its post-implementation review of RTI

HMRC launched its post-implementation review of RTI in April and approached Stakeholders for their input on a number of points including what HMRC had done well, what it could have done better and what actions still need to be taken. ATT provided a detailed response. A summary of this is provided below:

What HMRC did well during the introduction of RTI.

The decision to defer the implementation of in-year filing penalties until 6 October 2014 for large employers and to further defer this for small employers to 6 March 2015 were both welcome moves.

Another welcome move by HMRC was the decision, following lobbying from the ATT and other professional bodies, to remove from the final FPS the requirement to answer certain questions (which had previously been included on the old form P35). Answering these questions by 19 April had been problematic and administratively burdensome for employers, usually resulting in the need to submit a further return via an Employment Payment Summary once the employer was in a position to answer the questions.

What HMRC could have done better.

Overall, it was felt that, although there was early consultation, the initial warning comments made by the stakeholder community appeared to be largely ignored. ATT noted that a number of issues raised earlier on by employers and agents are only now being acknowledged and addressed by HMRC.

How HMRC dealt with disputed charges could have been handled much better. There should have been a clear procedure in place from the outset that was communicated to agents and employers. Instead, disputed charges appeared to disappear into a ‘black-hole’ for months and a back-log at HMRC’s end rapidly built up.

The issues employers are still struggling with

ATT’s response pointed out that the requirement to file ‘on or before’ is continuing to raise issues for employers. HMRC did introduce a couple of easements to assist employers (for micro employers and also a relaxation for all employers submitting within a three day window of payment) but both of these were due to end on 5 April 2016. We were concerned that the education provided by HMRC in the interim has not been enough and that employers are continuing to struggle.

Fortunately, HMRC have confirmed in recent weeks that the three day easement will continue to exist for at least another tax year, after which HMRC will review the risk-based approach to penalties.

Submitting amendments by an End of Year Update form (EYU) is still problematic. ATT have been pushing for a while now for the EYU form to be redesigned to report year-to-date figures rather than the difference between amount submitted and the correct amount.

The lessons HMRC can learn for the future

In ATT’s opinion, the number one lesson that should be taken away from this review is the importance of listening to the people who are on the front-line dealing with the area that is the subject of any project. As ATT highlighted, this will be an absolutely critical lesson to carry forward into the ‘Making Tax Digital’ project.

Further work or actions that should be considered by HMRC

ATT are strongly of the opinion that there is now an overwhelming business case for reviewing the ‘on or before’ requirements and moving the filing deadline to 5th of each month. This would have an extremely positive impact on the whole payroll community as it would significantly reduce burdens.  Much of the justification for the ‘on or before’ requirements would appear to have less relevance following the introduction of the Surplus Earnings provisions by the Department for Work and Pensions. The Surplus Earnings provisions work to effectively ‘smooth’ out fluctuations in earnings when determining the amount of the Universal Credit award, making the exact pay date far less significant.