The Chartered Institute of Taxation (CIOT) is calling on HMRC to accelerate the development of their Real Time Information (RTI) system, designed to allow the weekly or monthly reporting of wage payments through PAYE, in order to deal with the data being reported during the tax year.
The call comes after revelations that the Revenue are writing to five and a half million people who either under- or overpaid tax in the last tax year. Three and half million underpaid and another two million overpaid tax through the PAYE system for the year 2013/14.
Patrick Stevens, Tax Policy Director of the CIOT, commented:
“Employers have fulfilled their part of the bargain – they made a significant effort to switch to a new system of reporting PAYE in real time; now it is HMRC’s turn. Generally, the system is working well in respect of employer reporting but much work still needs to be done in developing the system for processing that information.
“As data comes in to HMRC, this should be acted upon immediately in order to adjust employees’ and pensioners’ tax codes to ensure that they are paying the right amount of tax in-year and to reduce the number of reconciliations needed at the end of the year. As the system remains underdeveloped on HMRC’s side, they simply do not have the capacity to deal with the data as and when it is coming in. In addition, there have been reports that in some instances, HMRC has been slow in processing people starting and leaving employment leading to the issuing of incorrect tax codes.
“RTI has undoubtedly modernised the way in which employment taxes in the UK are administered. This is a necessary modernisation but in order for RTI to achieve its full potential, HMRC must commit to completing the development of the system.”