HMRC’s RTI system is failing UK employers, study finds

For over a decade, HMRC’s Real-Time Information (RTI) system has been the backbone of payroll reporting in the UK. Introduced with the promise of improving tax accuracy and streamlining compliance, RTI was meant to ensure employers and employees were always up to date with their tax obligations.

Yet, as a new report from the Chartered Institute of Payroll Professionals (CIPP) reveals, systemic failures in HMRC’s RTI data collection process are leaving businesses in financial limbo—often for years.

The Data Black Hole

The CIPP report paints a stark picture: RTI submissions are frequently misallocated, payroll errors persist unresolved for months or years, and businesses are left in the dark about how to fix them.

One of the most damning findings is that HMRC has been aware of these problems for years yet has failed to introduce meaningful reforms. Payroll professionals report consistent misallocations of tax data, often leading to incorrect tax charges that take more than a year to resolve. Even when HMRC acknowledges an error, employers are frequently advised to make payments ‘to avoid legal action’—money that, in many cases, is never refunded.

The consequences are not just financial. Small businesses, lacking dedicated HMRC relationship managers, struggle the most. Many face the daunting task of navigating a bureaucratic maze where customer service agents offer conflicting advice, delay resolutions, or—alarmingly—disconnect calls when they cannot assist.

According to the CIPP report, “Employers have great difficulty getting accurate and well-informed advice from the employer helpline. With no view of the RTI data HMRC holds, this causes great frustration and time wasted for both employers and HMRC.”

Jason Davenport, CEO at The CIPP, echoes these concerns: “Errors resulting in disputed charges should be handled transparently and expediently, the CIPP will stand by our members to ensure this happens not just for them but for the whole payroll community.”

Case Studies Reveal a Pattern of Negligence

The report includes several case studies that expose the dysfunction at the heart of RTI.

• Duplicate Tax Records: Employers have reported instances where RTI submissions are recorded multiple times, leading to employees being taxed incorrectly and facing unexpected deductions. Fixing these errors is near-impossible, with HMRC directing affected employees to contact them individually—turning a business problem into a personal financial headache. As one employer described their situation, “It transpired that the two failed submissions were ‘partially successful’ and had applied some data to the employee records. These changes impacted employees’ reported earnings and therefore their tax codes.”
• Payroll Mergers Gone Wrong: When one company merged its payroll records with another, it triggered a £6,000 discrepancy in owed taxes. HMRC initially advised them to pay the incorrect amount, only for the dispute team to later admit the error. The case remains unresolved two years later. “The company decided not to pay the money sitting as owed on the government gateway as it would impact cash flow, and it was believed not to be owed. Since initial conversations with HMRC dispute resolution team, no contact has been forthcoming from HMRC, with the estimated timeline for resolution coming to an end in late 2024.”
• Legal Action Threats Over HMRC’s Own Mistakes: A business received an HMRC letter demanding £3,500 with court proceedings imminent, despite having no prior notification of the discrepancy. Faced with legal threats, they paid—only to later learn the error was on HMRC’s side. “HMRC advising a business that data which derives from the business are wrong seems like a strange stance to take.”

HMRC’s Data System: An Unchecked Risk?

At the core of these issues is an ageing system that appears unable to process payroll data reliably. HMRC’s Enterprise Tax Management Platform (ETMP), which manages tax accounts, often conflicts with the RTI core system—leading to discrepancies that employers have no visibility over.

This raises a troubling question: If some businesses are being overcharged, are others being undercharged? If RTI errors can create fictitious tax liabilities, it is reasonable to assume some liabilities have been lost in the data tangle. A tax gap of unknown proportions may be hiding within HMRC’s flawed reconciliation process.

Steve Wade, Chair of ICAEW’s Employment Taxes and NIC Committee, reinforces this concern: “This report, along with its real-life examples, reinforces the consistent message that ICAEW hears from its members regarding the RTI system. ICAEW agrees that HMRC’s RTI system and liabilities and payments databases need a radical overhaul.”

Employers Left to Fix HMRC’s Problems

The most frustrating aspect for businesses is that HMRC often refuses to share the data it holds. Employers and payroll providers are unable to see exactly what information HMRC is using to assess liabilities. As a result, companies spend months chasing non-existent debts or fighting to reclaim funds they never owed in the first place.

Even when cases are escalated, resolutions are painstakingly slow. The Charge Resolution Team (CRT) routinely takes 12 to 24 months to investigate issues, meaning businesses are forced to operate with uncertainty over their tax position. In one case highlighted in the report, an incorrect tax charge was left unresolved for over two years, crippling the company’s cash flow.

One payroll manager, frustrated with the process, described their experience: “When a representative can resolve the issue, it seems as though they shouldn’t have done so and have overstepped their remit.”

Glenn Collins, Head of Technical and Strategic Engagement ACCA UK, sums up the inefficiencies: “Far too much time is spent on non-productive basic tax administration and the simple chasing of information. HMRC’s focus must be on improving customer service and effectiveness to give us the modern, efficient tax system we need.”

The Call for Reform

The CIPP report makes several recommendations that, if implemented, could help restore trust in the RTI system:

• HMRC must provide greater transparency over RTI records, allowing employers to see the exact data held against them.
• More dedicated staff should be allocated to resolving the backlog of RTI disputes.
• The RTI system requires a full-scale review, ensuring it is fit for future expansion and capable of handling increasing complexity in payroll reporting.
• Employers should be granted limited editing rights to correct RTI submissions where clear errors are identified, reducing the burden on HMRC.

As the report highlights, “RTI data troubleshooting was either not offered or not within the remit of the first two advisers.”