Real-Time Information (RTI) is the system through which employers and pension providers report payroll information to HM Revenue and Customs (HMRC). It requires employers to:
- send data immediately, rather than waiting until the end of the tax year, and
- make multiple returns to HMRC throughout the year rather than a single annual return.
Reporting PAYE Information ‘On-or-Before’ Payment Date
One fundamental aspect of RTI is that employers must report PAYE information to HMRC ‘on or before’ the date they pay their employees. This means that when you pay your employees, you should also submit a Full Payment Submission (FPS) to HMRC on or before your employee’s payday.
Even when you pay your employees early or on a day like a Bank Holiday, it’s important to use the agreed payday for your submission. Deviating from this agreed payday can cause issues, particularly in calculating Universal Credit payments and other benefits.
Reporting Advances of Salary
RTI also applies to salary advances, which are arrangements between employers and employees that allow employees to access a portion of their earned salary before the regular payday.
These advance payments should be treated as a payment on account of earnings and reported in additional RTI reports on or before the payment date. However, recognising the administrative burden this creates, HMRC has proposed amendments to allow salary advances to be reported on or before the employee’s contractual pay date.
This change aims to reduce the reporting frequency for salary advances, but employers should stay updated with guidance from HMRC regarding this amendment. The consultation period has now ended, and we await the Government’s conclusions.
Loans vs Salary Advances
It’s essential that employers distinguish between salary advances and loans when it comes to RTI submissions. Loans, unlike advances, do not need to be reported to HMRC under RTI as salary payments. If the loan value, however, exceeds the beneficial loans de minimis, you must report it as a benefit-in-kind.
The beneficial loans de minimis is the threshold set by HMRC that determines when a loan provided by an employer to an employee becomes a taxable benefit-in-kind. It sets the maximum loan amount that can be provided without incurring a tax liability for the employee. The beneficial loans de minimis currently stands at £10,000.
Being Mindful of Late Filing Penalties
Employers are subject to late filing penalties if they fail to file one or more RTI returns by the filing date during a tax month unless they:
- have a reasonable excuse for not doing so and
- file the return without unreasonable delay after that excuse has ended.
The penalty is a monthly one and depends on the number of employees in the PAYE scheme.
|Number of employees||Monthly penalty|
|1 to 9||£100|
|10 to 14||£200|
|50 to 249||£300|
|250 or more||£400|
If a submission is more than three months late, an additional penalty of 5% of the tax and National Insurance contributions due for that month is charged.
Avoiding Late Reporting Penalties
The best way to avoid late filing penalties is to consistently file on time every month. This requires good payroll systems that ensure timely payroll processing and submission of the FPS before the pay run is triggered.
When necessary, an Employer Payment Submission (EPS) should be used for recovering statutory payments (such as maternity pay or sick leave) or claiming employment allowances. It should also be used if there is a nil payment due for the month.
Implementing clear procedures and regularly checking for new employees or leavers is crucial to avoid errors that could lead to late penalties.
The importance of timing
Time is of the essence when it comes to RTI reporting. Businesses should be mindful of the impact delays in their decision-making and administration can have. For example:
- HMRC can take anything up to 2-6 weeks to issue a PAYE scheme, so don’t leave it too late to register.
- Delays in setting up a PAYE scheme can affect compliance with pension auto-enrolment – particularly if employees have already received salary payments.
- Delays in logging when a new employee starts, or an employee leaves, on the PAYE system can lead to issues with tax codes and issuing P45s.
Other pitfalls we see businesses stumble with include:
- Making advance payments to employees outside the payroll process, but failing to report them in the Full Payment Submission (FPS). This is the report sent to HMRC about payments and deductions made to employees every time they are paid.
- Monthly ‘salary’ payments to directors are processed through the accounts but not reported to HMRC on an FPS, as recommended by guidelines. See this article for more information about payments to non-salaried Directors.
Real-Time Information has significantly improved PAYE reporting for organisations, making it more accurate and efficient. It’s essential, however, for employers to understand the reporting requirements, pay attention to details, and implement proper systems to avoid late filing penalties and ensure compliance with RTI regulations. Staying informed about HMRC’s planned changes is also important to avoid costly mistakes.
At Shipleys LLP, our payroll services team has been helping organisations successfully navigate the complexities of Real-Time Information – often running their payroll systems and compliance on their behalf. This then enables business owners and managers to concentrate on other areas of the business.
If you’d like to learn more about how we can help your organisation, speak to your Shipleys contact or one of our specialists shown on this page.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary. If you would like advice or further information, please speak to your usual Shipleys contact.
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