PAYE Reconciliations and RTI

Thank you to my colleague for highlighting this article from the Spectator; "The taxman’s dodgy data". Individuals involved in payroll should read it.

I have had no input into the article and do not know how they obtained the details. In other words I have no "interest" in the article but those who know me will know I certainly have an "interest" in the subject matter namely RTI. Many of my colleagues are no doubt bored of me highlighting the issues with PAYE data processed under RTI and the problems Employers have with reconciling PAYE accounts.

The article says that:

"The RTI data stream perfectly confirms the first law of computer systems: Garbage in Garbage out. And the scale of the numbers – and the associated problems – are huge. RTI processes more than 600 million records a year."

No one can deny the numbers are huge.

RTI had to be delivered on time because the introduction of Universal Credit depended on it. It therefore, became very political and remains so. It had to be seen as a success and was rushed in with no budget for post implementation corrections, improvements or proper tools for HMRC staff to use the data. Tools have now been developed and many "errors" are automatically corrected before they cause harm.

HMRC are only know developing systems that should have been considered from the start. They are now being developed not because they benefit the taxpayer but because they will reduce contact with the overwhelmed helplines.

The article highlights "an overall error rate of between five and eight per cent, working out to at least 2.5 million incorrect records making it through the system every month".

Duplicate records continue to be an issue. HMRC still has a tendency to blame employers when things go wrong. HMRC quote percentages in defence of RTI but if 1% are wrong of records are wrong, there as so many employees in the UK then that is a very large number of employees with incorrect records.

The article states that "The Spectator?has been told of FTSE100 companies who have experienced HMRC’s systems misstating their PAYE liabilities by millions of pounds – creating accounting liabilities and potentially cash flow issues". This is certainly consistent with my experience.

Will RTI get better? I doubt it. The proposal to payroll benefits from 6 April 2026, in my opinion, will cause there to be more amendments, more processing and more errors. The underlying issues need to be fixed before the complete mandation of payrolling benefits is introduced.

If you have a PAYE reconciliation or a RTI processing dispute then currently it will take 18 months before HMRC look at it. That is look at it, not the time taken to fix it and we have only 2 years before the payrolling of benefits is compulsory.