RTI: Essential to record correct payment date
In April’s Employer Bulletin HMRC will remind employers of what ‘payment date’ means for RTI submissions over Easter, but this is also important for payments at the tax year end this weekend.
What the words mean
HMRC’s imprecise guidance about the ‘payment date’ to be recorded in the Full Payment Submission (FPS) has long been a bugbear of mine. Sometimes the payment date is the same as the date employers pay their employees, but it isn’t always. The payment date is supposed to be the ‘contractual payment date’. But employees are not always paid on their contractual payment date if that day falls at a weekend or a bank holiday.
Why it is important
In January 2019 I reported DWP case which hinged on how earnings are reported for RTI, and the knock-on effect for Universal Credit awards for four single Mums. Since then HMRC has been alive to the crucial nature of accurate RTI reporting of payment dates for UC as well as for tax purposes.
HMRC will address this issue in the April 2019 issue of Employer Bulletin that is due out next week, but that publication date may be too late for some employers who pay in early April. So we have reproduced the HMRC article below.
It is crucial that employers are alerted to this issue today.
If an employer is due to pay their employees on 6 April 2019 and instead pays them on Friday 5 April, the ‘payment date’ must be shown on the FPS as Saturday 6 April 2019 or the payment of wages will have reported in the wrong tax year!
This what HMRC will say in the Employer Bulletin:
Reporting payroll when your normal payday falls on a non-banking day
The date you pay your employees will usually be agreed when they begin working for you. Typically, this could be at the end of a calendar month or on Friday each week.
It is essential that you report when you pay your employees on time and use the right payment date when doing so. Remember if you use an incorrect payment date, this could impact on your employees’ financial situation, including any income-related benefits, such as Universal Credit, so it is important that you send accurate reports to HMRC on time or as soon as you are able to do so.
However, there may be occasions, when you pay your employees at a different time and not on the agreed day or date. This can arise when the regular payment date falls on a non-banking day (i.e. on a Saturday or Sunday or on a Bank Holiday).
If so, a payment reporting easement applies to ensure that this payment is treated correctly for tax purposes. The date you should enter on your Full Payment Submission (FPS) will depend on when you actually pay your employees and whether this is earlier or later than their normal payday.
You may not be able to pay your employees on their regular payday during the Easter Holidays in April this year as there will be four consecutive non-banking days (19 April to 22 April 2019 inclusive).
If you would normally have paid your employees on any one of those dates, but instead will pay them early on the last working day before the Bank Holidays; then you must report your normal pay date on your FPS, for example:
When a regular payday falls on a non-banking day, but payment is made on the last working day before the regular payday.
|Regular date of Payment||Non-Banking Date||Actual date of Payment (or earlier*)||Payment date you use on your FPS|
|19 April 2019||19 April 2019||18 April 2019||19 April 2019|
|20 April 2019||20 April 2019||18 April 2019||20 April 2019|
|21 April 2019||21 April 2019||18 April 2019||21 April 2019|
|22 April 2019||22 April 2019||18 April 2019||22 April 2019|
If you decide to pay your employees on the first working day after the Easter Holidays – then you should report the payment on your FPS as if it has been paid on the regular payment day/date.
So, for example:
|Regular date of Payment||Actual date of Payment (or later*)||Payment date for FPS reporting purposes|
|19 April 2019||23 April 2019||19 April 2019 *|
|20 April 2019||23 April 2019||20 April 2019 *|
|21 April 2019||23 April 2019||21 April 2019 *|
|22 April 2019||23 April 2019||22 April 2019 *|
*We would recommend you send us your payroll submission early in these circumstances, but if you do send your FPS on a later date than the regular payment dates you must select “Late reporting reason code G”
All other payments you make on regular paydays that fall on banking days and the deductions due must be reported on or before the date of payment to your employees. There is more information at running payroll.