Big tax shake-up is ‘seriously flawed’
A HUGE tax overhaul affecting all PAYE employers is ‘badly designed’ with ‘fundamental problems’, the top accountancy body has warned.
The Real Time Information reporting system – requiring employers to tell the tax office online each time a worker is paid rather than yearly – came into force in October last year. Firms employing fewer than 50 staff and paying them weekly have until next month to comply.
Revenue & Customs planned to start imposing automated penalties for late reporting and payment from April 6, but announced last month it was delaying imposing penalties after ‘customer feedback’.
Peter Bickley of the Institute of Chartered Accountants in England and Wales said: ‘It is not going as smoothly as the Revenue would have you believe. It has been badly designed from the beginning and there are fundamental problems.’
Bickley told The Mail on Sunday: ‘There are problems of duplicate entries, items not being processed, information which employ- ers should be able to see on their screen not showing, employees put on the wrong tax code, and the Revenue’s debt management and banking arm pursuing underpayments based on incorrect information. This is causing a lot of anxiety.
‘The Revenue is saying “you have filed late” or “you have not filed something” in cases where the employer has filed late because they are allowed to under relaxations, or filed early and it was not recorded.’ The Institute met the Revenue’s Ruth Owen, who is in charge of RTI, to urge the Revenue to fix its IT problems and relax its efforts to chase underpayments. Bickley said: ‘We suggested they adjust their tone and make sure they are not sticking the boot in. A lot of employers’ time is being wasted and costs are running up. We are pressing Ministers for the Revenue to be given funding to make RTI work.’
The Institute is urging members to post on its ‘RTI – are you swimming or sinking?’ message thread on its website detailing any examples of problems. It has said firms should not be afraid of complaining to the Revenue or contacting their MP.
Ruth Owen, the Revenue’s director general of personal tax, said last month that the number of taxpayers hit by tax code errors was 20,000.
The impact assessment published with the Budget in 2012 estimated that RTI would save employers more than £300million a year. Bickley said he expected the system would take ‘five years to bed down’.
The implementation of RTI is the biggest overhaul to payroll legislation since 1944. It is designed to support the Coalition’s new Universal Credit system, which replaces six benefits with a monthly payment.
The Revenue said: ‘Over 99 per cent of PAYE records are now successfully reported in real time. Almost 93 per cent of employers are now using the process and most say they find the system easy to use.’