Under real time information (RTI), employers are required to notify HMRC electronically of payments made to employees. This is done via the submission of a full payment submission (FPS). The FPS must be submitted on or before the time at which the payment is made to the employee. Thus, when undertaking clients’ payrolls, good practice is to run the payroll first and make the RTI submissions, then trigger the payment to the employee. Clients who operate their own payroll should be reminded of the necessity to perform payroll tasks in the correct order. In the event that no payments are made to employees for a tax month (and thus there are no FPSs to file), an employer payment summary (EPS) should be submitted.
Penalties may be charged where:
- the full payment submission is late;
- HMRC did not receive the expected numbers of FPSs; or
- an EPS was not submitted in a month in which no payments were made to employees.
However, HMRC have historically allowed a three-day period of grace and do not charge a penalty if the FPS is late, but all reported payments on the FPS are within three days of the employees’ paydays. This is a concession not a right.
HMRC have recently announced that the concession will continue to apply until 5 April 2019. However, it should be noted that this three-day period of grace is not an extension to the deadline; employers who consistently file within this three-day window may be contacted by HMRC and considered for a penalty. It is essential, therefore, that clients have systems in place to ensure that the FPS is filed on time – the three-day period of grace should only be used in an emergency not as a matter of course.
HMRC will also refrain from charging a penalty if a new employer does not file their first FPS `on or before’ the payment date, but does so within 30 days of the date on which the payment was made. Employers are also allowed to file late in one tax month in the year before a penalty is triggered.
Written by the Tax Advice Network