New multimillion pound RTI system fails to reduce number of tax discrepancies
Are you one of the estimated 5.5 million people who have paid the wrong amount of tax this year?
The numbers of PAYE errors have increased this year, despite the new Real Time Information system being fully rolled out. You may be one of 2 million people who have paid too much income tax and are due a rebate. Or, more worryingly, you could be one of the 3.5 million people that HMRC are claiming have paid too little. It’s a good idea check your tax code now to make sure yours is right.
The PAYE system only checks tax paid against tax due at the end of every year. This means that things like changes in pay or job are not taken into consideration and lead to over and underpayments of tax. The idea behind the new Real Time Information system is that employers report their wage payments weekly or monthly, thereby ensuring increased accuracy. The Treasury told MPs that R.T.I. would “bring PAYE into the 21st century” and spent £270 million implementing the system. This year the numbers of errors has actually risen from 5.2 million to 5.5 million.
Some businesses had concerns that the new system would be too unwieldy. As payroll consultant Kate Upcraft said, “Taxpayers have spent hundreds of millions on R.T.I. and employers have had to spend hundreds of millions to use the new system, so we are entitled to expect significantly fewer errors in the reconciliation process.”
Tax inspectors have estimated the average discrepancy to be about £300.00 and claim that there have been an increase in errors because there have been an increase in the number of people in employment due to an upturn in the economy. HMRC stand by RTI and say that the positive effects of the new system will be seen in time. They also added that underpayments and overpayments would remain part of our tax system.