The Cost of HMRC's Failures can be considerable.It seems that Employers, Payroll Teams and Accountants have to spend in the region of £17.5 million per annum, just because HMRC can not find the original information. The following is an extract from the HMRC Spring Departmental Report. 
The reality is perhaps very far away from this lofty goal, as evidenced by the following piece of research. The Form P43 is issued by HMRC with the sole purpose of obtaining Pay and Tax details of individual Employees who have ceased a particular employment. The Form has to be completed by the Employer to whom it is sent, and therefore is in fact a repeat of the information that an Employer would have already sent in on a Form P45, Part 1. The wonder is that, although the Employer has already forwarded details of the Employees Pay and Tax at the date of leaving, apparently HMRC have not received the information, or if they have, they cannot find it. The Previous Pay and Tax details of an Employee are obviously required when HMRC are attempting to put an Individual back onto Cumulative PAYE taxation. It is a fact of life that in some types of Employment, there are very many instances of Employees not providing Forms P45, Parts 2 & 3, when they start the employment. The whole logic behind the multi-part Form P45 is that HMRC will have details of each Employees Pay and Tax on leaving, since the Employer will have supplied the details on the P45, Part 1. It should also be remembered that Employers being under a legislative imperative to supply the information, as those who may have been unfortunate enough to have experienced a PAYE Audit. The Research Team at www.payrollCHAT.com wondered how many times HMRC had to request duplicate details of Pay and Tax, and the answer was as surprising as it was shocking. The information was obtained under a Freedom of Information Request. In the year ending 5th April 2006, the first year that Compulsory Electronic Filing was operational, HMRC’s Computer Systems issued 3,599,311 Forms P43. These are requests for Pay and Tax details of Employees who have left the employment of the particular Employer. This figure does NOT represent the total number of this type of request, since it is possible for HMRC staff to issue non-computer, or manual, requests. The figure for the year ending 5th April 2007 was 3,495,044, a reduction of 104,267 or just under 3%, hardly a massive move forward and certainly not an exciting reduction in the work load of Employers. Electronic Filing was supposed to deliver workload reductions and was quicker, faster and easier as often stated by HMRC’s head of Customer Unit, Don Macarthur. Looking at these figures of Computer generated requests, over 3 and half million, one could be forgiven for thinking that either: - Employers failed to send in 3 ½ millions Forms P45, Part 1 or
- HMRC received 3 ½ million Forms P45, Part 1, but couldn’t match them to particular Employees or just lost them.
There are some 80 million Forms P14 submitted to HMRC each year and as each Form P14 represents the pay and tax of an employment, the fact that there are computer generated requests for some 3 ½ million duplicate information, that’s approximately 4.5% instances where the Employment Information of an Individual has not been received, or should that be dealt with, by HMRC. The likelihood of the first option, Employers just failing to send in the Forms P45, Part 1, is remote to say the least since it would imply that Payroll staff were taking a cavalier attitude. The second option, that is lost or unmatched Forms or electronic data, would appear to be much more the case. This supposition is reinforced when one looks at the number f Forms P14 which HMRC are unable to match to individuals each year. The number of Forms P14 which HMRC placed in their euphemistically named Residual File, for the year ending 5th April 2006, was approximately 12 million. Not exactly a drop in the ocean? This failure, for that is what it would appear, by HMRC would be no more than merely very annoying, were it not for the fact that it places a cost burden on what HMRC Senior Management are now calling Customers. This cost burden can be roughly computed as follows: | Time to locate Record and Complete Form | Time Costs Hourly Rate | Total Annual Cost(3 ½ million Forms) | | 30 mins. | £10.00 | £17,500,000 |
The £17.5 million pounds is very much an approximation, since the time to locate and obtain the required information and the actual hourly rates are deliberately set on the extremely low side. The expression Unpaid Tax Collectors is often applied to those in the Payroll Profession, but perhaps that should now be changed to indicate that there are real and serious Cost implications involved. Perhaps the most annoying part of this situation is the fact that HMRC staff are quick to pontificate and lecture on what Employers and Payroll Staff should be doing, but these same individuals are slow, almost to the point of inertia, in looking at what HMRC processes, or the lack of them, are impacting on their Customers. The vast amounts of Public Funds, which are expended by HMRC, must be channelled into those areas that deliver results for Employers, Payroll Departments, Accountants etc. as well as Individual Citizens. The fact that HMRC have to ask for what would clearly appear to be repeat information some 3 ½ million times a year, at a cost to both parties, is unacceptable to many. What do you think about this situation? Let us have your views. |
Payroll Costs 
