HM Revenues & Customs (HMRC) has revealed that it found a number of technical issues during its real-time information (RTI) pilot, which is the key underlying technology for its modernised PAYE system.

The RTI system will automatically update employee tax records to ensure that workers pay the right tax and/or receive the correct benefits. It is expected to go fully live for all employers in time for the October 2013 introduction of the government's new Universal Credit system, which covers benefits.

Retrieving data more regularly could bring many benefits for HMRC, including greater efficiency through the automation of tasks, more accurate tax credit renewals and improvements in cash flow and debt management.

However, in a report released this week HMRC has highlighted a number of technical issues that arose during a pilot that began in 2012 and led to 66,240 employer schemes (6 million employees) being introduced onto the RTI system.

The pilot began in April of last year and HMRC gradually increased the number of employer schemes over time, hoping that a controlled approach would allow it to carry out tests and iron out any issues.

The National Audit Office recently found that the RTI PAYE project is over-budget, not resilient and may miss its deadline. However, unsurprisingly, HMRC has taken a less critical approach and believes that the technical issues are being handled appropriately.

For example, HMRC identified a number of situations where erroneous duplicate employment records were created by its systems. It said that the majority of these were the result of employers changing payroll IDs without indicating, as is required under RTI guidance, or as a result of payroll software errors in a 'small number' of software packages.

These duplicate records increase the amount that HMRC's systems expect the employer to pay, as they double the count deductions from the employees' wages and salaries. They can also lead to incorrect tax codes and tax reconciliation calculations.

However, the report plays down these problems. HMRC said: "To reduce the incidence of duplicate employment records, additional functionality was implemented in April 2013 which improved data matching.

"HMRC also undertook further engagement with the software industry to highlight the issue and strengthened the RTI guidance for employers and software developers."

The pilot also found problems with HMRC's Basic PAYE Tools (BPT) product, which was introduced to provide smaller employers (less than 9 employees) with simple payroll processes with a free product for RTI reporting. However, these employers complained that the product was less intuitive to use than commercial software.

HMRC has said that the pilot has been used to "improve the guidance around BPT use, whilst developing further enhancements to improve its performance."

HMRC concluded its report by stating: "It is clear that the success of the national roll out of reporting PAYE in real time so far is based on the solid foundations laid by the success of expanding the RTI pilot into live running."

Despite the report's optimism, it is worth noting that the National Audit Office found that the cost of implementing RTI is currently at £356.6 million - some £115.5 million over budget - because of new development costs required to increase the system's functionality. Also, within the expected cost, HMRC has not budgeted for any extra costs stemming from any new issues that may arise.