It was a hellish journey into London standing room only all the way from Watford to Euston, then crammed into a tin can on the Victoria Line after allowing 2 tubes to leave as they were just too full for my suburbanite bones to contemplate squeezing in, but on the third I realized I was going to be there all day, so squeeze in I did. Makes me shudder to think what’s going to happen on TFL when the Olympic’s finally arrive.
Anyway, got there quite late for registration so missed my free bacon butty but managed a gulp of coffee and a posh biscuit before shuffling in to the auditorium. After intro’s by Philip Whitely, editor-in-chief we had to my mind, the main event of the day. Phil Nilson giving us an update on HMRC’s Real Time Information (RTI) the start of which is just over a year away.
He did say that because it was such a big project he would skirt over some of the issue because he didn’t think they were too important. According to some research carried out by HMRC it seems some employers believe RTI is a voluntary initiative and they are having difficulty educating some businesses that this is in fact a compulsory measure. Yes indeed, the biggest shake up to the taxation system since the 1940’s is compulsory. The sorts of entities that have no idea about RTI are the small businesses such as the car mechanics with 2 or 3 employees who have no interest in engaging with HMRC. He mused that possibly including a storyline on coronation street might help to get the message out. Sort of a funny idea but also one with merit, if the producers of said soap can be persuaded it has any kind of….erm….wow factor.
He acknowledged that RTI would fundamentally change the relationship between employers (I think this means the public in general) and HMRC. It’s good that HMRC acknowledge this, to me it reflects to a large extent the lack of trust in private employers, who in my opinion are pretty good at applying correct tax codes and policies. He said RTI is “on track”, which is good for him but my software supplier hasn’t confirmed that they know anything at all about RTI so I am certainly not on track, which was one of my reasons for attending the conference.
The old end-of-year forms p35 and p14’s will be replaced by a Full Payments Submission (FPS) which is an unfortunate abbreviation as FPS is the initials for one of my competitors, but anyway, the FPS will include some (in fact a lot of) new information. One such piece of information is passport number, if known. I’m not sure why this info is required but possible our beloved HMRC are taking the example set by the Chinese who don’t allow people out of the country if their systems say they aren’t up to date with their taxes, who knows. All earnings will be included in the RTI submission including those under the lower earnings limit.
The submission will be by one of 3 methods, either via a software download from HMRC’s website which will be RTI enabled, software submission through the government gateway, or the electronic data interchange (EDI) which was going to be scrapped but presumably HMRC aren’t ready to use the BACS system yet.
Eventually, he said, the BACS system would be used for everyone including a net zero submission for those paid by cheque, cash or internet banking. We know why this is, it’s the elephant in the room, eventually HMRC and the Government want to move to centralised deductions. Once RTI is in place and the BACS system is being used, centralised deductions will be just one easy step away. Resistance is futile.
He also said there’d be no more P45 or P46, instead there would be starter and leaver statements. This sounds like the same thing to me but he just meant HMRC don’t want to receive the bits of paper.
Then he was going on about the 20% of employees in multiple employments whom RTI is supposed to benefit as it will keep their tax code up to date, then in the next breath he said in the first year there won’t be a quick exchange of information, so there won’t be any benefit in the first year it seems.
He also said that employers are going to like RTI because employee’s will no longer go to us with complaints about incorrect tax codes or simply questions about their pay. Quite frankly this is bollocks, employees want to talk to the people paying their wages, not HMRC and I don’t mind employees coming to me asking the questions about their pay and I suspect many employers feel the same. Phil also said that RTI will “reduce contact”, a particularly cold phrase for what is basically part of day to day life when working for your employer, in fact it is desirable as any reason to engage with your employees is a good reason, however HMRC (not being an employer in the real commercial world) think that “reducing contact” is a desirable outcome of RTI.
The reason RTI will reduce contact, in his opinion, is because the tax will be correct. Of the thousands of phone calls received by HMRC from employees the vast majority are of just three types: How much tax am I paying? Am I on the right tax code? Can I have a refund please? I fail to see, even in a perfect system that he predicts RTI to be, how it will stop these questions being asked, indeed they are often asked and most often the answers are found to be: £x.xx; yes and no.
Another good point about RTI, and it is a good point, is it will stop employers underpaying their tax and NIC’s. HMRC will know every pay period exactly what is owed so they will know if an underpayment is made. Very good point, I don’t know how many employers habitually underpay their PAYE, I’ve never experienced one that does but I suspect there are some and it might amount to a big number. Correct payments and correct reporting will be good for tax credits and good for the department of work and pensions (DWP).
He said if we (employers) don’t get our bit right then HMRC can’t get their bit right. No mention of HMRC not getting it right all on its own, which is surprising to me as I expect the move from receiving yearly details about individuals’ pay and tax to monthly and weekly will exponentially increase the administrative burden at HMRC and therefore exponentially increase errors made by them, which are already many.
In the RTI pilot which begins next month there will be 10 employers, there will be another 300 added by May and June, in July 2012 there will be 1,300 and by March of next year 250,000 employers will be involved. During the tax year of 2013 to 2014 all 1.6 million employers will be in the scheme. We will receive a letter “inviting” us to take part. Again, another strange use of language a little like the way they refer to us as customers, it isn’t an invitation it is an instruction and we are not customers we are subjects. I like plain English not fancy-nancy, nicey-nicey speak that doesn’t mean what it actually says.
We were then offered the chance to volunteer to be in the pilot, I laughed as did many other delegates. He finished his talk, which was as it was last time, a very well presented, interesting and engaging talk, by emphasising the need for “clean” data. Data quality is key and if employers provide poor quality data then RTI will not work as intended and so they will work with us until such time as it is considered we should be up to scratch. Then we’ll have the issue of penalties for the submission of poor data.
I accept RTI is happening and we as payroll and operations professionals need to make it happen, however, the fact that when the BACS system is used then centralised deductions is just around the corner is a cause (personally speaking) for greater concern.
There was a pretty lively debate afterwards and some good questions from some delegates with Simon Parsons, the chair of Inland Revenue’s Electronic Exchange Network (IReeN) suggesting that RTI was already an interim solution. Interim to what you may ask?
That was the main event for me, I attended the whole day however with talks about auto enrolment into company pensions schemes, new employment laws and a very entertaining response to the budget given by Simon Parson’s. I stayed for the after event networking and drinks, functions that I often shy away from but with a 15 minute presentation at the beginning from David Anderson, director of Dale Carnegie about how to better network, it was an extremely enjoyable and useful evening event.
All in all a great day, cheers Payroll World.