Taxpayers are at risk of wrong codes as revolutionary 'real time' PAYE system comes into full force

HM Revenue & Customs describes it as the “biggest change to PAYE for 70 years” and it comes fully into effect today. Called “Real Time Information”, it is a transformation supposed to help other government departments get an up-to-date picture of taxpayers’ earnings on which to calculate benefits. But the system seems to be creaking. Accountants say individuals and companies are having difficulty accessing HMRC records. Others report erroneous information finding its way into workers’ tax codes. This could lead to the wrong tax being paid and future sums being owed – in either direction. David Heaton, a partner at Baker Tilly, the national accounting practice, is one of several authorities to voice a warning. He said employers’ calculations of what was owing still failed in some cases to tally with HMRC’s. He was aware of six client firms of various sizes at which the Real Time Information system or RTI was causing this sort of problem. “A system that accepts submissions from employers but doesn’t then reflect that information in its calculations doesn’t sound like it’s working,” he said.

What exactly is the change – and what has gone wrong?

In the past employers would deduct tax from a worker’s monthly pay, but only yearly would they submit a file to HMRC relating to that employee’s earnings, perks and other relevant affairs. Under RTI the taxman wants to be updated every time a payment is made. For most employees that means data sent monthly after each payday. Employers paying weekly will have to send weekly updates. The volume of information being accumulated and transferred, involving more than 44 million PAYE workers, is staggering.......Read more here

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