Is an RTI & Universal Credit storm brewing?
One of the reasons RTI (Real Time Information submissions to HMRC by payroll) was introduced was so that the Governments flagship benefit reform, Universal Credit, could have up to date information on benefit claimant’s earnings.
The concept of Universal Credit is that benefit payments can be flexed up or down in line with reported earnings. We recently submitted a Freedom of Information Request to HMRC, who advised us that in 3 years, 97,648 employers had disputed the charge calculated by HMRC. We ourselves have had a disputed case that HMRC have taken over 2 years to resolve. We get updates every six months or so that advise they are still looking into it but have a large backlog.
It seems from the outside that HMRC are in complete disarray in relation to the data they receive from employers. Although they’ve recently started automated, in year tax code generations based on RTI data for employees.
Universal Credit guidelines state that payments not be adjusted during periods in which the Secretary of State believes the RTI data is inaccurate, which has likely been the case up to now. Given that HMRC have started using RTI data for coding, it’s possible that the DWP will soon start using the data for benefit claims. At that point employers should be prepared to receive queries from employees who have had benefit payments stopped or reduced.
One way to guard against this is to utilise BACS hashing, which involves a short code being submitted with a BACS payment that matches the same code in an RTI submission so that HMRC can verify the RTI data against the physical payment. HMRC initially wanted to make BACS hashing compulsory but this was dropped when it became clear that this could not be supported via traditional internet banking. We are able to offer BACS hashing as part of our payroll service.