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HMRC to investigate cause of PAYE discrepancies

August 13, 2013


HMRC announced yesterday they have set up a specialist team to identify why discrepancies are arising on employer PAYE accounts since RTI’s introduction. This development follows the growing number of reports from employers, payroll experts and accountants that PAYE values reported to HMRC in real time are not being reconciled correctly by HMRC, resulting in discrepancies between the amount of PAYE and NIC employers report as due and the amount HMRC systems show is due.

In a statement issued on their ‘What’s New’ page, HMRC said that they were working with ‘a number of PAYE schemes’ to ‘examine what is causing these discrepancies, and then to resolve them.’  This investigation comes in response to feedback HMRC has received informing them that some PAYE schemes have experienced ‘difficulties in reconciling’ the amount of tax HMRC is demanding with their own data on how much should be due to the Revenue.  The statement did not give any information on the scale of this issue.

The specialist HMRC team are attempting to use information from selected PAYE schemes which have reported reconciliation difficulties to ‘understand the issue in greater depth,’ and ‘take the steps necessary to prevent [discrepancies] arising in the first place.’

Findings from the specialist team regarding the root causes of these RTI reconciliation issues will be used to update HMRC guidance for employers and their agents, the update says.  HMRC have already updated their guidance on what information is available and when on the Payments and Liabilities Viewer.  It is not clear whether information on these root causes will also be made generally available once they are identified in order to help users of the system understand why they have been experiencing issues with RTI.

The HMRC announcement does not indicate whether these discrepancies between what an employer thinks is owed to HMRC and what HMRC thinks is owed relate to the issue of weaknesses in the accounting and financial reporting elements of RTI systems which were highlighted by the NAO report of early July. The announcement appears to indicate that HMRC believes the issues can be resolved once sufficiently understood. There is no indication that such issues are systemic in nature and, as has reported, HMRC attribute reconciliation problems to employer reporting or third party payroll software.

HMRC’s acknowledgment of the reconciliation issue has met with relief from the accountancy profession. Albert Goodman LLP, commented on Twitter it was “delighted with HMRC’s recognition of this issue at last”.

Up until now HMRC has insisted that RTI is working well, and that any problems were minor and not widespread. Jane Brothwood, the head of HMRC’s RTI stakeholder engagement team, writing on AccountingWEB, maintained this line that RTI had been an overwhelming success, as recently as 31 July 2013. The formation of a dedicated group to deal with the issues suggests that this is not in fact the case, and points to systemic issues within RTI which the NAO’s report confirmed was a possibility, given the way HMRC chose to deploy real time reporting of PAYE.

Writing in the August issue of Payroll World, Simon Parson, head of compliance at Ceridian, said: “Having personally checked four separate HMRC Debt Management and Banking division claimed misbalanced PAYE scheme submissions from April through to June, it’s clear to me that not all is well with RTI.”

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