HMRC has announced a reporting change for employers who pay employees in advance of the normal payday in December, but this could come too late for employers who have already made those payments.
On 17 December, employers and agents who are signed up to email alerts from HMRC received this surprising message from the director general of customer services:
Guidance for employers on Real Time Information reporting obligations for payments made early over the festive period
“We know that some employers pay their employees earlier than usual during the festive period, this may be due to the business closing for Christmas and New Year.
“If you do pay early, please report your normal payment date on your Full Payment Submission (FPS).
“For example: if you pay on 21 December but your normal payment date is 31 December, please report the payment date as 31 December. In this example the FPS would need to be sent on or before the 31 December.
“Doing this will protect your employees' eligibility for Universal Credit, because an early payment could affect further entitlements. This guidance applies only for the 2018 festive period.”
It appears this last-minute announcement was prompted by a judicial review case recently heard in the High Court, for which judgement is awaited. This case centres around the unfairness of a personalised and rigid universal credit award period. The advance payment of salaries at Christmas can mean that two salary payments are made in the December UC award period, and none in January, leading to very real cash flow issues for Universal Credit claimants.
It has always been the case (see CWG2 para 1.8) that where the contractual payment date falls at a weekend or bank holiday, and the employee is paid on the first banking day before or after the contractual payment date, the payment date that should be shown in the full payment submission (FPS) is the contractual payment date, not the date that money was credited to the employee. This was an easement designed to alleviate a problem for HMRC, and it is a problem that will occur again at the end of this tax year.
The first day of the next tax year: 6 April 2019 is a Saturday. Payments that are made on Friday 5 April must still show Saturday 6 April as the payment date, to avoid the month one payment being made in the wrong tax year.
Until the announcement from HMRC this week, the non-banking day easement fell away if payment was brought forward earlier than the first banking day before the contractual payment date. If the payment due on 25 December was brought forward to Friday 21 December, the previous instruction from HMRC was that the FPS had to show the payment date as 21 December. That has now changed, as under the new HMRC guidance the payment date would remain as 25 December.
Some payroll software may not be able to insert the contractual payment date in the FPS, and have a different actual payment date when funds are credited.
One year only?
Why does the HMRC announcement say that this is only for the 2018 festive period? This bunching of payments has been a problem for Universal Credit claimants since RTI and UC were introduced, and it will continue to be every Christmas.
Whose fault is this?
On Thursday 13 December the Employer Bulletin for December 2018 was issued with this incorrect wording: “Submit your payroll on or before your employees’ pay day with accurate and up to date employee information to avoid delays in matching the payroll information to the correct individual record.”
Jon Thompson, HMRC’s chief executive, told the Public Accounts Committee in September 2018 that employers were the cause of problems with PAYE. No wonder employers are getting things wrong when the HMRC guidance on something as fundamental as the ‘date of payment’ changes on such a regular basis.
About Kate Upcraft
Kate is a technical writer, editor and lecturer on all aspects of employing people - primarily payroll and HR matters.