HMRC's RTI reporting for PAYE appears to have massive teething problems according to a leaked document. Millions of taxpayers on PAYE have had their taxes calculated incorrectly by HMRC for 2013/14.

According to a report in the Telegraph today the RTI system cannot cope with the data it is obtaining and many taxpayers have had their records duplicated. This means that HMRC's annual reconciliations are inaccurate and any repayment made or underpayment requested may be incorrect.

According to the leaked email received by the Telegraph, "a select group of senior HMRC staff and accountants were told "thousands" of mistakes were made. The recipients were advised to tell taxpayers who questioned their bills "not to repay any underpayment" of tax. It said anyone who had overpaid tax should not cash any cheques they had received."

"Anyone who has already cashed a cheque will see the money potentially clawed back if a mistake has been made. Whistleblowers behind the leaked email said the numbers affected by the latest blunder could "easily run into the hundreds of thousands". "HMRC refuses to admit the system doesn't work, and it's scandalous that there is no politician holding them to account as the whole programme of welfare reform could be put at risk because of this," one said. "The system is not fit for purpose, it's inherently flawed and routinely produces errors that cause a huge mess for families and employers."

HMRC has been unable to be specific as to how many people are affected although in a news release it admits that it has sent out incorrect tax calculations (P800s) in a three week period from 15 September 2014.


We should not be surprised as HMRC admitted earlier in the year that it had some peculiar issues with RTI and dupliation of records. Back then the problem affected PAYE months 9 and 10. HMRC's systems duplicated data and employers were blamed for getting their Full Payment Submissions (FPS) wrong. At the end of 2013/14 many employers misunderstood the change in end of year filing deadline which means that they may well have the same problem. HMRC has also made some employers set up extra payrolls in order to report that final tax month of 2013/14: a lot of extra data to process.

A further factor to watch out for is that in the race for employers to attempt to ditch their weekly payrolls in favour of monthly reporting their software may treat everyone as a leaver and a starter in the same year. The questions this raises are 1) whether HMRC's systems will cope with that, 2) whether employees will understand what has happened and what therefore their earnings are for the year and 3) whether employers will manage to report the changes under RTI.