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RTI: unexpected effects

Sep 9, 2013, 05:53 AM
Authors : Linda Pullan
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Post date : Sep 9, 2013, 05:53 AM

According to HMRC, as of 31 July 2013, they had received more than 10m PAYE submissions in real time since 6 April 2013. HMRC are reportedly happy with the progress that real-time information (RTI) is making, and the RTI team is being wound down this autumn because, as far as PAYE is concerned, it is business as usual.

A recent problem reported to Payroll Alliance by one of its members has uncovered a very interesting issue: the company has more than 25,000 employees paid over a number of payrolls at varying pay frequencies. It operates the payroll using a well-known payroll software package and was a member of the RTI pilot.

A few employees reported that they had been contacted by the Student Loan Company, stating it had been notified by HMRC that, according to their records, the individuals were no longer employed or in receipt of taxable benefits. For them to repay their student loan, they needed to provide information regarding their employment status.

We raised the issue with HMRC’s student loan panel and received a response within a few days. The outcome was surprising.

At the end of 2012/13, the member company was processing its final payrolls for the year. Its payroll software provider decided to extend its payroll numbers from eight digits to ten by adding leading zeros.

It was then decided that the payroll numbers should be reverted back to eight digits. The software provider put together a software patch to do this, which unfortunately was not applied. When the company checked its payroll reports, the payroll numbers had been truncated to eight digits, omitting the leading zeros, so the business was not aware of the change.

The change from eight to ten digit payroll numbers had a huge impact on RTI. As the employer had not indicated a change of payroll number in the relevant fields, HMRC’s National Insurance and Payroll Service read the change as a second employment. It registered the original employment as ceased and advised the Student Loan Company accordingly.

As a result of the investigation, HMRC had to correct their system and the Student Loan Company also had to do additional work to rectify the error.

All employers should be on their guard concerning changes to their payroll software, as they can unwittingly cause huge problems for RTI without anyone realising it. The changes will not only create difficulties for HMRC but, in future, may have an impact on employees’ right to universal credits.

Linda Pullan is head of Payroll Alliance. She can be contacted by email and on 020 8662 2050

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