RTI – The Consultation ResponseSunday, November 20th, 2011
The story so far…
The Coalition Government issued a discussion document in July 2010 called ‘Improving the Operation of Pay As You Earn (PAYE)’, which introduced us to the concept of Real Time Information and, later, Centralised Deductions. Just after this, the DWP published their White Paper ‘Universal Credits – Welfare that Works’. This outlined the new benefit (UC), which is set to replace a range of benefits on a household. Importantly, we came to realise that UC could only work with RTI in place, and UC was set to go live in October 2013. 02 December saw the Government confirming the RTI go-ahead in its Impact Assessment, followed by the first consultation document on 03 December 2010.
This document reconfirmed that RTI would be going ahead with a phased introduction from April 2012 for ‘volunteer employers’ culminating in live for all employers by October 2013. It also confirmed that the concept of Centralised Deductions would not be progressed. HMRC outlined their vision of how RTI would work in practice, with a transfer of personal and payroll data via the BACS channel, though an alternative would be made available for employers who did not pay staff through the BACS system. The P45 and P46 procedures would be redundant, as would the annual P35 and P14 Returns, with this information being transmitted via the RTI file. The condoc posed a number of questions and sought feedback by 28 February 2011.
By the time the HMRC consultation closed in February 2011, we already knew some key information:
- RTI was coming, without doubt, and the success of Universal Credits was reliant on it
- RTI would be a massive change to the way we work, however, this was positive change and may result in a reduction in our administration burden
- RTI’s success, and our ability to comply with HMRC requirements, was going to be dependent on both the capability of our software and the completeness of the personal and payroll data that we held
What we did not know were the exact details of how we would make our RTI submissions and what data would be required. The following series of events sought to address our knowledge gaps. We have attempted to keep this as brief as possible, remembering that these series of articles are designed to bring readers up-to-date:
04 April 2011
HMRC issued a press statement confirming what we already knew – RTI was going ahead. The statement asked for volunteer employers and software developers who would form part of the pilot, launching in April 2012.
13 May 2011
A significant development was the announcement that RTI reporting would not be through the BACS channel, as had previously been indicated in all literature to date. Due to pressure from the software and banking industries, two channels would be allowed:
- Government Gateway – this was always going to be an option anyway, recognising that a significant number of employees (10%) were not paid by BACS
- Electronic Data Interchange (EDI) until ‘at least April 2014’
Software developers required separate technical information for both submission routes. HMRC stressed in their statement that RTI submissions via BACS remained their long-term goal.
May – August 2011
HMRC published a draft Technical Pack for software developers, followed by actual Technical Packs for both Government Gateway and EDI RTI submissions. During this period, HMRC offered a number of Software Developer Forums around the country and developed a FAQ document specifically for software developers.
This period was, largely, making sure that developers were provided with all the necessary information to enable them to build the routines that will enable us to submit RTI files. We are not focusing on these specifications.
However, they also established a Customer User Group and began consultations with employers that would form part of the pilot from April 2012. We will be discussing these next week.
Seven months after the consultation closed, HMRC published their ‘Summary of Responses’ document. The document started at the beginning with the discussion document in July 2010, like this series has. There was the briefest of mentions on the concept of Centralised Deductions, though by this time, the proposed scheme was not even referred to by a name! Once again, the link with Universal Credits (UC) was mentioned, and how the DWP will use the RTI information to identify fluctuations in earnings and, therefore, possible entitlement to the new benefit. The document referred us to the issues contained in their December 2010 condoc and moved on to summarise the responses. The document is detailed below in ‘Further Information’, however, for payroll professionals, can be summarised:
- There were 187 responses, ‘from software developers, payroll bureaux and employers, pension providers, and various representative bodies and individuals’
- As would be expected, developers focused on technical issues, others highlighted the operational ones. Both highlighted the ‘challenging timetable’ for the RTI live date
- Whilst the BACS channel remained their ‘strategic’ choice, two RTI channels would be available, EDI and the Government Gateway (this was only confirmation of what had been publicised by HMRC in May 2011). EDI was described as a ‘transitional measure’
- Most of the required RTI data items were already held by employers, or could be easily gathered, however, there were concerns on three items:
Employers reported that this information would be difficult to report with accuracy, due to various factors – monthly paid employees, for example, are just paid one twelfth of their annual salary each month, which is not a reflection on the hours that they have actually worked in that month. HMRC stated that, whilst there will still be an RTI reporting obligation, weekly hours worked will be reported in bands, as per existing Tax Credit legislation. These bands are:
- Up to 15.99 hours
- 16 to 29.99 hours
- 30 hours +
- ‘Other’ (where the above categories do not apply, e.g. pensioners)
Many respondents advised that this was obtained as part of HR checks to ensure the employee is entitled to work in the UK. However, it was held by HR and not recorded in the payroll system (from where the RTI file would be generated). The Responses document advised:
‘Employers will be asked to provide HMRC with a passport number where it is collected as part of a pre-employment check for a new employee who does not provide a National Insurance Number when asked’
Many replied that holiday was not held or paid under a separate pay item in the payroll. HMRC confirmed that this would no longer be a required item but the RTI file must contain the number of pay periods to which the payment relates – i.e. that a payment has been made reflecting three week’s work
- 75% of employers stated that the timetable for implementation could not be achieved. HMRC responded by saying that the link with UC meant that there was no flexibility. However, HMRC agreed a revised implementation schedule with pilot and volunteer employers with the objective that 25% will be RTI live by March 2013
- The impact on small employers was highlighted and HMRC advised that its role was to ensure its work with software developers made the RTI filing burden as minimal as possible. Similar concerns were raised for elderly and disabled ‘accidental employers’, though HMRC advised they are still considering their support for this group
- HMRC confirmed that necessary draft legislation would be published for consultation and that they would continue to work with employers (actually published 14 November 2011)
To summarise the dates to form a chronological order:
- September 2010 – HMRC ‘discussion’ document ended
- November 2010 – DWP White Paper published announcing Universal Credits
- 02 December 2010 – HMRC Impact Assessment confirms RTI go-ahead
- 03 December 2010 – HMRC RTI Consultation phase started
- 28 February 2011 – HMRC RTI Consultation phase ended
- 04 April 2011 – HMRC Press Statement
- 13 May 2011 – HMRC Statement
- Summer 2011 – Software developer information plus discussions at the Customer User Group and with Pilot Employer
- 30 September 2011 – Summary of Responses to December 2010 consultation published
- 14 November 2011 – Draft Regulations published
Given events since the close of the consultation in February 2011, in reality, it seems that RTI was a forgone conclusion, even at the discussion document stage. What was not were the details of the scheme and how it would work in practice.
The Summary of Responses document was only published in September 2011, when the consultation itself had long finished. No explanation was given for the delay, save the comment that HMRC prioritised the views and issues of software developers to ensure that information provided to them would enable them to have systems in place to meet the RTI deadlines.
These are not negative comments. RTI brings with it many challenges and changes, however, also the prospect of reduced administration for employers. For this reason, RTI should be welcomed and embraced by the payroll profession for the significant advances that this will bring.
However, how long will it be before we start to feel these benefits?!
Next Week – bringing us up-to-date…..
- Payroll Help 28 October 2011 – RTI The Beginning
- Payroll Help 04 November 2011 – RTI – What HMRC Did Next
- Payroll Help 11 November 2011 – RTI – The First Consultation
- Improving the Operation of Pay As You Earn (PAYE) – HMRC Impact Assessment
- Universal Credit – Welfare that Works
- Improving the Operation of Pay As You Earn (PAYE) – Collecting Real Time Information
- HMRC Press Statement 04 April 2011
- HMRC Statement 13 May 2011
- Summary of Responses 30 September 2011