RTI and ‘On or before’ – research but no review?
On 16th September 2015 HMRC published the results of some research they had commissioned into how small and micro businesses were coping with the requirement to file RTI data on or before pay day.
The stated aim of the research was to assess readiness amongst micro employers (defined as those with nine or fewer employees) ahead of the scrapping of the easement on 6th April 2016 that allows them to file on or before the last pay day in the tax month, rather than on or before each pay day.
Before we consider the findings it’s worth making two salient points:
- The research was conducted with only 50 employers (hardly a statistically sound sample?).
- The definition of ‘pay day’ in the introduction to the document is wrong, which is one of the underlying issues with RTI; HMRC are too imprecise in their use of terminology.
So given the fact that the sample is the sample what about the definition?
Within the Full Payment Submission, the date that is supposed to be in the field with the title ‘payment date’ (field 43) is in fact contractual or regular payment date, not actual payment date. Sometimes they will be the same date, sometimes they won’t!
Easter of this year demonstrates this elegantly. Many businesses pay their staff on the first day of the tax month. The first day of the tax month (and tax year) was Easter Monday 6th April.
It was not possible to pay anyone on that day via the banking system so payments had to be made on Thursday 2nd April. If Thursday 2nd April was set up as the ‘payment date’ in the FPS that would be the wrong tax year, let alone the wrong tax month.
HMRC explained in the February Employer Bulletin that where the payment is due to be made on a non-banking day but is brought forward to the first banking day before, or the first banking day after that, then the date in field 43 should be the non-banking day i.e. the Saturday, Sunday or Bank Holiday. Where the payment is brought forward earlier than the first banking day, then the date that must be reported is the earlier date. This happens most typically at Christmas where a payment that is due on 25th of December is brought forward to say 20th, then 20th must be in the FPS as the easement only applies if payment is brought forward to 24th.
But back to the research:
Most of the 50 employers sampled had moved to full RTI reporting from the outset so had not used the easement. This had required them to do some or all of the following:
- Move to using commercial payroll software and away from HMRC’s Basic PAYE Tools
- Moved their employees’ pay frequency from weekly to monthly
- Moved to electronic payroll in preference to a paper based manual system
Those utilising the easement are of course the key respondents. They cited the following difficulties in meeting ‘on or before’ reporting:
- Achieving sign-off by senior staff
- Timesheets not arriving in a timely fashion
- Poor internet connections
- Holidays or sickness meant there was no one available to process the payroll
The research does pick up on some points that will not be easy to resolve ahead of the removal of the easement next April:
- For employers who have just one person doing a weekly payroll (and who cannot get their employees to move to a monthly pay frequency) there is always the issue of holidays and sickness to be addressed that can result in late reporting
- Despite the promises of high speed broadband this is still a pipe dream (pardon the pun) for many parts of the country, particularly rural locations where there are also many small employers with fluctuating seasonal workforces such as in the farming and tourist sectors
- Remote workers who have difficulty getting accurate timesheets in on time (again the lack of internet access is an issue here)
Even in such a tiny sample of small and micro employers, the message that comes through loud and clear is that unequivocal guidance is key. Commissioning research without a clear definition of ‘on or before’ given to the researchers shows how little the intricacies of RTI are understood by experts and these can easily trap the unwary employer and lead to penalties
Finally what of the ‘review’ I mentioned Some readers may remember that in last year’s autumn statement David Gauke agreed with the OTS’ recommendation number 6 that HMRC conduct a through review of RTI and ‘on or before’ reporting. Nearly a year later there is no sign of the review, or even a terms of reference. Surely this report isn’t enough to satisfy the Minister that his commitment has been met?