My thanks to a loyal reader, who has posted the following comment concerning HMRC's inability to deal with matters "real time".
The reader makes the valid point that the system is incapable of transmitting realt time data between DWP and HMRC.
This clearly has implications for RTI and Universal Credits.
My question to those of you have intimate knowledge of the RTI flagship is, will RTI satisfactorily deal with, resolve and be able to cope with the issues raised by this loyal reader?
"An individual (me) has 2 forms of "income" which consists of a pension following 40yrs employment and a DWP minimum ESA payment of the taxable kind.
A succession of tax codings ends up with notification of 2013/14 to include an "underpayment restriction" amount of -£X, cue rapid query via endless wait on phone!
Pray tell me HMRC says I, what does this amount relate to and how did you arrive at the figure?
HMRC - We don't know what your income is going to be and we have to estimate it.
But says I (and herein lies the RTI scenario bit)
my pension is paid from you as my ex employer through the realms of MyCSP (my civil service pension) and your closest partner agency DWP pay me the reduced ESA, what gives?
HMRC states we don't know what DWP pay you (ESA taxed by HMRC via instructions to MyCSP as DWP can't collect the tax due for whatever reason) until the end of the tax year! Cue incredulity on my part at this stage as besides the fact that HMRC are estimating that which it is possible to calculate, by my calculations I am due to receive an inflation busting increase in my ESA of 14.65%.
So what does all this mean for the taxpayers of the UK?
I don't know what an incorrect tax code costs to put right but multiply it by the number of time my tax code has been "adjusted" in 6 months (7) and you begin to get the picture.
Then there is the "underpayment restriction" which unchallenged would result in a tax-free loan by the taxpayer - me, to HMRC, prior to the subsequent adjustment the following year.
Now, call me a cynic, but do you suppose that the vast majority of these adjustments are one-way and unethical?
So, what does it all mean?
Think carefully with RTI looming.
There is the archaic system of ESA taxed via pension provider - a system of taxation via third party involvement, with all the opportunities for mistakes along the line...
The system is incapable of transmitting real time information from DWP to HMRC.
Even with all the correct information to hand (i.e. its own and DWP data, HMRC is incapable of calculating "the right amount of tax at the right time".
HMRC obtains a positive balance in this area at the expense of the taxpayer, not creative accounting but certainly unethical especially during a reccesion.
What does that mean for the Universal Credit and RTI systems?
Over to you Ken."
Tax does have to be taxing.
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