Real Time Information post implementation review
08 December 2017
HMRC has published its post implementation review of RTI which addresses the questions of whether the programme achieved what it set out to do, how RTI is performing more than three years after it started and what needs to be done to improve performance and make best use of this strategic asset for government.
The Real Time Information (RTI) programme implemented the biggest change to Pay As You Earn (PAYE) since 1944. This post implementation review addresses the following key questions:
Did the programme achieve what it set out to do?
The evidence is that the programme did achieve what it set out to do and that the changes made by RTI were positive. By integrating the payroll and payments process, HMRC is able to deal with PAYE payments and debt more effectively, and improve the flow of PAYE payments to the Exchequer. Considering the scale and pace, the introduction of RTI for many (but not all) businesses went relatively smoothly.
Since its introduction in 2013, there have been year-on-year improvements in how RTI is embedded within payroll processes and by 2016, 99% of businesses had integrated it into their payroll operations. There remain a small minority where ongoing problems exist, and with whom HMRC continue to work to seek further improvements in their experience of RTI. Many key stakeholders in the tax and payroll sector still consider the introduction of RTI to have been an additional burden on their business, and have certainly seen a transitional cost which was not fully forecast at the start of the programme.
HMRC found an overwhelming consensus that the migration of more than 1.5 million employers into RTI through a staggered implementation was the right approach. The majority of contributors welcomed the programme’s collaborative approach (including winning a Chartered Institute of Payroll Professionals award for engagement and consultation) although some felt the timing of consultation was sometimes too late. They also welcomed the programme’s willingness to adapt, for example by deferring the implementation of in-year penalties. Conversely, some responses indicated unease about the impact of real time reporting on small business, with many smaller employers feeling unready for its introduction and implications.
How is RTI performing more than three years after it started?
RTI is performing well with HMRC processing real time information for more than 40 million employees and occupational pensioners to support PAYE and Universal Credit (UC). There is evidence of clear progress in making better use of RTI as a significant strategic data asset for government, including pension auto enrolment and student loans.
However, a proportionately small number of data quality issues and mismatches between HMRC and employer records continue to create discrepancies that can be time consuming and potentially costly to resolve for employers, their agents, and for HMRC. This position has been exacerbated by the delay in providing a real time view of RTI data for employers and agents to check against their own records, and the process for amending submissions, which some employers find difficult to follow.
RTI has enabled the tax and benefits system to become more responsive than ever before. HMRC has started to amend some tax codes earlier and to make them more accurate by using RTI data to work out an annualised estimate of pay and plan to further expand this in 2017, when more real time tax codes will use RTI data. The use of RTI in UC includes examples of claimants disputing the existence of their earnings, or understating their earnings or number of employments until presented with unequivocal RTI data. Once UC is fully implemented, RTI is expected to result in savings of about £600m from prevented erroneous and fraudulent UC claims.
Overall, the consensus remains positive that the changes brought in by RTI were necessary, have modernised many PAYE and payroll practices, and reduced error and fraud across government. In addition, HMRC fully accept the lessons to be learned on consultation, communication and implementation.
What needs to be done to improve performance and make best use of this strategic asset for government?
There is still much to do to ensure that employers find it easier to understand and comply with their reporting obligations, and also that discrepancies are resolved quickly. Where HMRC has identified continuing problems, it has recommended changes to ease the position for employers and agents and is putting a programme in place to deliver these by 31 March 2019 and to deploy wider lessons in our transformation plans.
HMRC acknowledge that its communications and guidance are not reaching all employers, with some small businesses struggling to understand their reporting obligations and the consequences of failing to meet them. In response, HMRC has committed to thinking more innovatively about how best to reach smaller employers and give them the clarity they need, not just in RTI, but across all of its transformation plans.
The overall incidence of data quality problems is low, and HMRC continue to work with any employers and agents experiencing such problems through guidance and education. To accelerate progress in this area HMRC propose increasing its focus on employer-related issues by establishing a core HMRC communications team, and involving external experts and employers earlier when needed to materially change guidance or redesign processes. In addition, HMRC recognise the need to accelerate system enhancements that allow employers to self-serve, using digital tools to amend their submissions or claim repayments.
Despite the progress made in using RTI data to inform Tax Credit awards and across wider government, external stakeholders expressed frustration about the perceived slow pace with which HMRCX is using RTI data to improve the overall accuracy of PAYE codes, and reduce the number of individuals who end the tax year either owing tax or due a refund.
HMRC state in its report that it is conscious of the need to accelerate its plans in this area in order to fully realise the benefits of RTI data for PAYE customers, and to its departmental operations as a whole.
The full report can be accessed here - Real Time Information programme - post implementation review report.
The report provides the specifics of the background to the Post Implementation Review, the objectives of the review and the outcome and benefits. It also includes the detail of recommendations and subsequent actions and HMRC state that it is creating a plan to monitor progress made against each of the recommendations and that it will share that plan with its main stakeholder groups (which includes the CIPP so we shall keep you updated accordingly).