Real Time Information provides savings for HMRC

Review identifies strong return on investment from systems for real time filing of PAYE information

HM Revenue & Customs (HMRC) has achieved a strong return on the investment in its Real Time Information (RTI) system since it was introduced in 2013, according to a newly published Post Implementation Review.

Blurred figure by entrance to HMRC buildingThe document also predicts that the system will provide further savings in payments under universal credit as the benefit system is fully rolled out.

RTI was set up to align with the creation of universal credit, a flagship programme of the Coalition Government elected in 2010. Its implementation has been much quicker and made it possible to use the system, which provides for the real time filing by employers of PAYE info on employees, in improving operations inside HMRC.

The review says that 99% of businesses have now integrated their PAYE operations with the system, with ongoing problems for just a small minority.

It points to a series of estimated savings since the introduction: £64 million for HMRC; £672 million from reduced overpayments of tax credits; a one-off cash flow benefit of £813 million to Exchequer; and a net saving in the administrative burden on employers of £292 million.

Against this it cost £307 million for HMRC to implement the system – pointing to a strong rate of return – and employers spent £292 million on transitional costs, suggesting that any additional savings on their side will provide an overall bonus.

Benefits to DWP

Further savings are expected through the use of RTI in universal credit, with a forecast that it will benefit the Department for Work & Penions (DWP) to the tune of £600 million by preventing erroneous and fraudulent claims. Examples in the early stages of the roll out have included the use of relevant data to catch a claimant who failed to declare a redundancy payment of over £20,000, and people disputing they had any earnings until presented with PAYE data.

In addition, there have been savings of £491 million from the correction of claims for other DWP benefits.

The review acknowledges that there have been a few data quality problems, but says the overall incidence has been low, and that HMRC is setting up a communications team to help employers with the issue.

It acknowledges that there have been frustrations with the perceived slow pace in using RTI data to improve the overall accuracy of PAYE codes, and says the department acknowledges that it needs to speed up its work in the area.

On a more positive note, it says RTI has made it possible for HMRC to make some tax codes more accurate and work out annualised estimates of pay.

“Overall, the consensus remains positive that the changes brought in by RTI were necessary, have modernised many PAYE and payroll practices, and reduced error and fraud across government,” the review says. “In addition, we fully accept the lessons to be learned on consultation, communication and implementation.”

Image from GOV.UK, Open Government Licence v3.0