HMRC’s treatment and use of data needs a “fundamental reform”, says a report looking at PAYE improvement by the All Party Parliamentary Group on Taxation (APPG).

The report says that without significant improvements to Her Majesty’s Revenue and Customs’ (HMRC) overall information management and data quality use, the benefits of ‘real-time’ PAYE reform (RTI) and the new Universal Credit – currently being progressed by the Government – would not be realised.

Developments since the last report by the APPG on Taxation, published in March 2010, are examined in the new report, and the causes behind the current problems evident with the operation of the PAYE system are reviewed.

Recommendations intending to help resolve existing issues are made, with concepts such as improving the IT infrastructure and data quality and the adoption by HMRC of more efficient commercial sector practices cited.

The report said the current PAYE system must be modernised and changed to cope with the demands of 21st Century working patterns, and concludes that by improving data quality, HMRC could enhance the level of service it offers to its customers, reduce error and make efficiency savings.

HMRC should implement secure online two-way communication between itself, citizens and organisations; increase the use of automated matching for open cases; extend the use of the current secure online login system, allowing customers to keep their personal details up to date; review and update the end-to-end data and information management requirements as part of the move to RTI; and continue the changes that will enable citizens to view all of their dealings with HMRC in one place or document.

“It is evident that the taxation system in the UK is not fit for purpose,” commented Ian Liddell-Grainger MP, APPG Tax chairman. “However, I commend the coalition Government for progressing the much needed reform of the PAYE and welfare systems and I hope that our report makes a positive contribution to this debate.”

He said the right changes could see PAYE become a successful and efficient way to collect tax. “However, HMRC needs to fundamentally overhaul the way it treats and uses data. It should adopt processes already widely deployed in the commercial sector, including automated data matching, the use of existing third-party services and empowering the citizen to enable them to keep their own personal details up to date.”

Adam Marks, report author, added: “Without improvements to HMRC’s overall information management and data quality the benefits of RTI will be largely wasted since their full potential will never be realised and the problems around open cases and rising citizen and organisation complaints will continue.”

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