RTI - unexplained bills and overpayments

HMRC whitewash

It was always going to be a tough mission to introduce such a massive change to the PAYE system as real time information (RTI). For that reason we have some sympathy with HMRC, especially as it had to implement it within tight deadlines set by the government. However, it’s making a tricky situation worse by refusing to admit the full extent and reasons behind some of the problems RTI is causing.

Duplicate records

In its recent report HMRC cited duplicate employee records as one of the main RTI trouble spots, and blamed employers. Typically, this happens where an employer corrects an employee’s payroll record, e.g. date of birth, start date, and enters the amended information on their next full payment summary (FPS). Despite this being the method of correction recommended by HMRC, it causes its system to create a duplicate employee record. This in turn creates a double RTI charge which shows up as an underpayment of PAYE.

Tip 1. If HMRC claims you owe PAYE tax or NI contributions, but your records show you’ve paid what was due according to your FPSs, then a duplicate record might be the cause. Contact HMRC’s helpline on 0300 200 3200 to check.

Tip 2. A sign that HMRC has created a duplicate record is where you unexpectedly receive a revised “BR” code for an employee. This happens because HMRC assumes the same employee has two jobs - the real one and the duplicated one - and so automatically issues a code for the phantom second employment.

Timing differences

One trouble area that HMRC put its hands up to is not keeping all of its records up to date. However, it has badly underplayed the frequency and consequences of this. There are delays between the time you make a payment or submit an FPS and the time these transactions show up on HMRC’s internal records. There can be a further delay in these showing on the PAYE records you can view online.

Overpayments or underpayments

The timing differences mentioned above can mean that when you view your online PAYE account these show either as an under or overpayment which actually doesn’t exist.

Tip 1. Where your HMRC record shows you’ve paid too much, don’t reduce your next PAYE payment to take account of it unless you can identify exactly what caused the overpayment. Check the payments of PAYE you’ve made with your FPSs; allow a week or so and check again. If an overpayment is still showing contact HMRC’s helpline and ask it to find out what’s causing the difference.

Tip 2. If HMRC demands a payment that you don’t believe is due carry out the same check (as above) of payments due and payments made. If all is in order then again allow several days for transactions to find their way through the system. If HMRC still says you owe more money, call its bluff by falling back on a little known regulation (R.78(6) PAYE Regulations) . This says you can insist it proves its case by inspecting your PAYE records to find the alleged error.