This month's cover story

Can we fix it?

In the first year of compulsory e-filing of in-year forms, there are problems with HMRC’s new computer system. Philip Whiteley describes how payroll staff have been getting the blame, and how political pressure is piling on the Revenue.

This being Web 2.0, the drama unfolded on social media. The LinkedIn group of the Institute of Payroll Professionals (IPP) started receiving posts from members in mid-January about serious errors on coding notices. HMRC even posted its official reply there a couple of weeks later.

These serious errors led to employees receiving the wrong take-home pay and payroll managers getting the blame. Further investigation has revealed that HMRC knew about these problems back in September.Whatever the causes,
the matter has now become political.

As the Chartered Institute of Taxation warned that taxpayers could be asked to pay up to £108 a month too much, Liberal Democrat spokesman Vince Cable told Payroll World: ‘At a time when families are feeling the pinch, it is unacceptable that the taxman will take more from them than they should be paying. It is yet another in a long line of expensive IT projects that have not delivered.’

Richard Bacon, Conservative MP and a critic of HMRC, added: ‘HMRC expects taxpayers to pay the right amount of tax at the right time, but taxpayers have every right to expect HMRC to get the facts straight before asking them to hand over their hard-earned money. It is ironic that the cause of this error was a new computer system designed to improve the accuracy of PAYE.’

Julia Abbotts, payroll and benefits officer at Taylor Wessing, was first to raise the alarm on LinkedIn. ‘Over the last few months we have been receiving a number of P6s for employees who have already left.We send our P46s by EDI so assumed HMRC’s systems would be updated automatically.’

She also reported problems with Student Loan notices:‘We have started to receive SL1 notices for employees who have already paid back their loans in full through the payroll and have previously been issued with a stop notice from HMRC. This is causing hardship for the employees who now have to organise a refund for the student loan company.’

Days later, Ms Abbotts added: ‘I spoke to the employers’ helpline again last Friday [22 January 2010] and they said… there is nothing they can do and it is probably down to the student loan company not updating their information as the HMRC only informs it once a year of payment details.’

The P6 issue may be due to the fact that HMRC has not updated the P45 information on its systems correctly or quickly enough, she added.

Apportioning blame
Sandra Pickett, payroll manager at Hornbuckle Mitchell Group, commented: ‘I have been having problems since before the switch to the new system. Since the switchover, though, we have received many incorrect codes, most of them D0.

‘HMRC’s service is atrocious. I am still waiting for a call back from last year regarding them putting some of our clients and staff onto a PAYE reference that had been set up by a former colleague, but never been activated. How could this happen when we send everything electronically? I was told it was all to do with the new computer system.

‘I do not think HMRC does enough to help the employer. Most of my calls to the helpline are referred to the employer division. Of course I cannot ring them and rely on them calling me back within 72 hours, which is inconvenient as I cannot sit by my phone waiting for a call back and cannot always leave meetings to take their call! It’s ridiculous,’ said Ms Pickett.

Matt Boyle, an independent PAYE consultant, said the episode casts doubt over HMRC’s ability to handle modernisation: ‘Strange that the old computer system, which had been denigrated by some HMRC senior management, worked out PAYE codes year after year, without this type of mistake.

‘The more problems with delaying updates to your account, the more wrong your financial estimate will be. This could have a considerable affect on payroll teams, since they would be the first port of call by irate employees. It also means considerably more work for payroll systems, since HMRC would be issuing PAYE codings, then corrected ones, then another corrected one, and so on.’

HMRC says…
After a delay, HMRC issued a statement. David Ellis, who co-chairs the Employment Consultation Forum with Karen Thomson of IPP, posted initially on LinkedIn. He said: ‘Although the vast majority of coding notices are correct, the transition to NPS has brought to light discrepancies in our existing records and this is resulting in a significant number of incorrect notices being issued. There will be cases when some people receive an incorrect coding notice, or more than one coding notice for the same employment, because of these discrepancies.

In addition, the system uses employee payroll numbers as part of the validation routine alongside National Insurance Number, date of birth and gender automatic validation.

‘We have been liaising with IPP and other stakeholders during this period, investigating examples where provided so we can better understand the circumstances in which some incorrect codes are generated.Your support and that of your members has been hugely helpful in informing our impact analysis… We are not complacent and listen carefully to the concerns that employers and employees have. The issues surrounding coding notices are being treated with the highest priority.

‘Anyone who is concerned that their code may be wrong [should] check it… on our website at www.hmrc.gov.uk/incometax. If they cannot resolve the matter there, they [should] call HMRC to make sure the right tax code is applied… We appreciate our telephone lines are extremely busy and are maximising our customer contact service.’

Modernising was never going to be easy, but perhaps HMRC needs to find ways to communicate problems earlier. This episode seems to have featured too much crossing of fingers.


Payroll World - March 2010