Payroll RTI Reporting: Exception to the rules
HMRC have issued a reminder to employers that in respect of PAYE Real Time Information (RTI) filing, the contractual payment date should be reported rather than the actual payday.
This applies whether the employees are paid early or late and is particularly likely to happen over Christmas.
Often, employers may pay their employees earlier than usual over the Christmas period. This can be for a number of reasons; for example, during the Christmas period the business may close, meaning workers need to be paid earlier than normal.
if you do pay early over the Christmas period, please report your normal (or contractual) payday as the payment date on your Full Payment Submission (FPS) and ensure that the FPS is submitted on or before this date.
For example, if you pay on Friday December 17 2021, but the normal (or contractual) payment date is Friday December 31 2021, you must report the payment date on the FPS as December 31, and ensure the submission is sent on or before December 31 2021.
Doing this will help to protect your employees eligibility for Universal Credit, as reporting the payday as the payment date may affect current and future entitlements.
The overriding PAYE reporting obligation for employers is unaffected by this easement and it remains that you must report payments on or before the date the employee is paid, that is payday.
Universal Credit and the importance of correct and in time Full Payment Submission (FPS) reporting
Employers need to follow HMRC’s guidance to send the FPS on or before your employees’ payday and enter the usual date that you pay your employees, even if you pay them earlier or later. For example, If you pay your employees early because your usual payday falls on a Bank Holiday, you should still enter your regular payday.
If this process is followed, then the issue of double monthly earnings in one Universal Credit assessment period can be avoided.
this relates to a judgement issued in November 2020 by the Court of Appeal in the case of Johnson and Others. It concerned employees Who received two calendar monthly payments of earnings in one Universal Credit monthly assessment, none in another, and lose out on the work allowance.
The work allowance is an amount of earnings which certain claimants can keep before earnings start to be deducted from Universal Credit entitlement.
The Court of Appeals judgement affects a small minority of claimants in very specific circumstances. we know that this issue can occur when a claimant’s calendar monthly pay date on the last day of their assessment period are close together. The amendment to the legislation means that they will not miss out on the work allowance.
The Court of Appeal ruled that the way the Department of Work and Pensions calculated Universal Credit awards involving earnings in an assessment. Was a correct application of the regulations, but that not considering the impact on the specific cases of those paid calendar monthly who are affected by “a non-banking day salary shift” was irrational.
The legislation, which came into force on 16 November 2020, means that faces look affected by this issue, monthly earnings will be reallocated to another assessment., which means that only one set of earnings will be taken into account rather than two, and certain claimants will be able to benefit from any applicable work allowance.
The situation for people who are paid weekly, fortnightly, or four-weekly is different. people paid at these frequencies will always have occasions where more than one set of earnings will be taken into account in a monthly assessment period. Moving a payment in these cases would not help to restore a regular payment pattern, it would simply move the same issue to a different assessment.
For example, those who are paid four-weekly will normally get one payment in each assessment. But will have one assessment period a year when they will receive two four-weekly payments. This is because there are 12 assessment periods a year and those who are paid four-weekly will receive 13 payments a year.
As income rises, Universal Credit is reduced, and this is in line with the long-standing general principle of means-tested benefits.
However, whilst the Universal Credit amount will reduce in the assessment. Where the household has received two payments of four-weekly earnings, they will still have the benefit of their earnings.