Department publishes evaluation of benefits and challenges of new system

Credit: Crown Copyright

A post-implementation review of HM Revenue and Customs’ Real Time Information Programme has said the system has so far saved hundreds of millions of pounds in fraudulent or erroneous benefits claims but admits the system is not universally popular with employers.

The introduction of a requirement on businesses to provide HMRC with details of payments made to staff and pensioners either on or before the date they are made began in 2013, and was billed as the biggest change to the Pay As You Earn since 1944.

HMRC’s just-published post-implementation of review of the system, deemed necessary for the successful introduction of Universal Credit and legislated for in 2012, said it has so far achieved what it set out to do, but it conceded its rollout has not gone smoothly for all businesses.

The review said the system had cost HMRC £307m to implement, but had provided savings of £672m by reducing tax credits overpayments caused by fraud and error, and in-year income discrepancies; savings of £64m for HMRC in terms of operational processes; and “a one-off cashflow benefit to the Exchequer” from earlier payment, measured at £813m.

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It conceded that employers had been hit with a combined £292m in one-off and transitional costs, but said they saved the same amount each year in “administrative burden”. Under the new system, employers need to switch to real-time reporting of payments to staff, but no longer have to collate and file year-end statements on individual employees and former employees.

It also admitted that some external stakeholders believe the cited transitional cost were an underestimate, and that ongoing costs were downplayed.

The report said 99% of businesses had embedded RTI into their payroll processes by last year, but said a small minority remained “where ongoing problems exist”.

It said: “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.”

On performance, HMRC said the system was processing real-time information for more than 40 million employees and occupational pensioners, but it accepted that a “proportionately small number” of data-quality issues and mismatches between HMRC and employer records continued to create “time-consuming and potentially costly” discrepancies.

Figures in the report said that in 2014-15 a total of 37,065 employer schemes formally disputed their liability to PAYE, out of a total of 1.8 million such schemes. In 2015-16 the system was dealing with 2 million employer schemes and 40,902 formal disputes arose.

HMRC said 86 staff had been deployed to sort out the issues in 2015-16, and that typically 80% of the problems arose from duplicated employment records with the remainder caused by late, missing, or incorrect RTI submissions.

“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,” it said.

On universal credit, HMRC said RTI would result in savings of about £600m from prevented erroneous and fraudulent claims once the system was fully implemented.

The tax-collection agency said that evidence so far showed RTI helped to identify examples of universal credit claimants disputing the existence of their earnings, understating earnings, or understating the number of jobs they had by providing “unequivocal” data.

It added that data sharing with other government departments had already seen savings of £491m from the correction of claims to DWP benefits other than universal credit.

“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,” it said.