On 19 March HM Revenue & Customs (HMRC) announced a temporary relaxation for small employers to the RTI ‘on or before’ rules. HMRC have now provided details of the entries that should be made on an FPS where the relaxation is being used.
Details of the relaxation are available at: http://www.att.org.uk/technical/newsdesk/RTI_letter_Exchequer_Secretary
HMRC have provided the following example as a guide for those who need to report payments on an FPS that occurred over the month:
‘How to report payments on the FPS
‘Alpha Ltd is a small company who manually calculates pay and pays its employees
on a weekly basis but then passes its records to a payroll agent to run the payroll and produce payslips on the last pay date of the month.
‘Alpha Ltd joins RTI on 6 April 2013. It makes payments on 10 April, 17 April, 24 April
& 01 May. For the purpose of the example, the applicable tax rate is assumed to be
‘Alpha Ltd has the following employees: Mr A: Earns £250 per week
Mrs B: Earns £250 per week. Left 17 April 2013
Mr C: Earns £1000 per week. He has mileage expenses of £40 per week which are not subject to tax or NICs
Mrs D: Earns £1000 per week. She has Sports & Social subs of £10 per week as deductions from net pay
Mr E: Earns £1000 per week. Started 20 April 2013
‘Under the transitional arrangements, Alpha Ltd should include the following information on its FPS on or before 1 May 2013. This example only tries to cover some data items that might otherwise cause confusion. Alpha Ltd should also include all other relevant data items as per the existing What to report guidance.
|Mr A||Mrs B||Mr C||Mrs D||Mr E|
|Pay Frequency (42)||W1||W1||W1||W1||W1|
|Payment Date (43)||1 May
|17 April 2013||1 May 2013||1 May 2013||1 May 2013|
|Weekly Period Number (44)||4||2||4||4||4|
|Number of earnings periods covered (48)||4||2||4||4||2|
|Taxable pay in period (58)||£1,000||£500||£4,000||£4,000||£2,000|
|Value of payments not subject to tax or NICs in pay period (58A)||N/A||N/A||£160||N/A||N/A|
|Value of deductions from net pay in pay period (58B)||N/A||N/A||N/A||£40||N/A|
|Value of tax deducted or refunded from this payment (68)||£200||£100||£800||£800||£400|
Contributions due on all earnings in this pay period (86B)
‘Commentary and explanation
- Pay frequency: Even though the payroll is run monthly, the frequency of payment is still weekly and therefore needs to be reported as W1.
- Payment date: Even though there are up to four separate payments to each employee in this example, for the purposes of the transitional arrangements only, we want you to report the income as if all the payments were made to that employee on the last payment date in the month. So in this example, the payment date ordinarily will be 1 May 2013. However as Mrs B left on 17 April
2013, her payment date needs to be reported as 17 April 2013.
- Weekly period number: You should enter the tax week number that relates to the last payment date in the period.
- Number of earnings periods covered: As this is a transitional arrangement,
you should enter the number of periods that are covered by the FPS report. In this example, as there are 4 payment periods, you should enter 4, except for
both Mrs B & Mr E, who started and left during the month.
- National Insurance contributions should be calculated by reference to the correct weekly earnings period and threshold and deducted when the earnings are paid.
- Taxable pay in period: As we want you to report all the income as if it was paid on the last payment date for the month, all the taxable pay has been added together to arrive at the totals entered for Taxable pay in period (58).
- Value of payments not subject to tax or NICs in pay period: As we want you to report all the income as if it was paid on the last payment date for the month, all the payments not subject to tax or NICs has been added together to arrive at the totals entered for Value of payments not subject to tax or NICs in pay period (58A).
- Value of deductions from net pay in pay period: As we want you to report all the income as if it was paid on the last payment date for the month, all the deductions from net pay has been added together to arrive at the totals entered for Value of deductions from net pay in pay period (58B).
- Value of tax deducted or refunded from this payment: The figures used in the above table are for example purposes only and are simply to illustrate that we want you to report all the tax deducted as if it was deducted from the income of the last payment date for the month. All the tax deducted has been added together to arrive at the totals entered for Value of tax deducted or refunded from this payment (68).
- Employees Contributions due on all earnings in this pay period: The figures used in the above table are for example purposes only. All the National Insurance contributions calculated have been added together to arrive at the totals entered for Employees Contributions due on all earnings in this pay period (86B).
- A small employer is one who employs fewer than 50 employees at any point during the year.
- Although not identified separately above, we would also need you to complete the appropriate starter and leaver information for Mrs B & Mr E.
- Should a tax code change, the tax code to be reported on the FPS is the tax code applicable at the last payment date of the month.
- NI Category letter – if the NI Category letter changes during the month, you still need to report the payments appropriate to each category letter. Please see National Insurance contributions for further guidance.’
Report an issue to the ATT
If you have any particular problems that need to be taken up with HMRC, please report them to us via our special RTI issues page at www.tax.org.uk/tax-policy/Surveys/RTI_Issues.