Following consultation with the RTI Customer User group, of which the CIOT is a member, HMRC have issued some guidance on the RTI ‘Irregular Payment Pattern Indicator’. This guidance explains the purpose of the indicator, and when and how it should be used. It is important to follow this guidance to ensure that HMRC do not think that employees have left an employment. We are grateful to the CIOT Technical Team for sharing this important information with us for the benefit of our members.
The text of the HMRC guidance is:
Irregular Payment Pattern Indicator
If an individual is paid irregularly, but is always paid at least once every three months, or is reported on each regular FPS, then you do not need to set the irregular payment indicator.
If your employee is paid on an irregular basis and is unlikely to be reported on an FPS for three months or more, you need to set the irregular payment indicator to ‘Yes’ on the Full Payment Summary (FPS).
Unless you set the irregular payment indicator or the appropriate pay frequency field, HMRC will assume that an employee who has not been reported on the FPS for a period of time has left that employment.
Once the indicator has been set it is advisable to leave it set as ‘Yes’ if payments continue to be irregular. This often applies to;
• casual or seasonal employees
• employees on maternity leave
• employees on long term sick leave
• any employee who for any reason will not be reported on an FPS for a period of three month or more
If an employee is paid infrequently, but regularly, say every three, six or 12 months, then there is no need to set the irregular payment indicator. The ‘pay frequency’ field should be set to ‘M3’ (for three months), ‘M6’ (for six months) or ‘MA’ (for annually) as appropriate. This will ensure HMRC does not close the employment record.
What happens if an employer just sets the irregular payment indicator for every employee?
HMRC strongly advices against setting the irregular payment indicator against every employee payroll record. The purpose of the indicator is to help ensure HMRC’s records align with employer’s records so that we can calculate the tax you owe quickly and accurately. If you incorrectly set the indicator, the information HMRC holds about your business will become out of date and your records will no longer align with HMRC records.
What happens if an employer does not set the irregular payment indicator, and does not report an employee for a few months?
HMRC will check if an employee has not been reported for a certain period of time (minimum of three months) and will treat them as having left that employment (unless the appropriate ‘pay frequency’ field is set).
Note: While employers get used to reporting PAYE in real time, HMRC will not close employments which have not been reported for three months or more. However when RTI is fully up and running we will turn on this functionality
Will HMRC notify an employer / employee if it closes an employment because no payments have been reported for three months?
HMRC will not notify the employer or the employee when an employment record is closed on this basis.
What happens if HMRC closes an employment because the irregular payment indicator has not been set, will the employer need to reprocess as a new starter or will HMRC automatically re-instate them?
The employer should continue to report their payroll information on an FPS as an ‘existing’ employee. HMRC will reopen the employment record on receipt of an FPS showing a payment has been made in the same year the ceased employment is held. If it falls in a different year a new employment will be created with a deemed start date for the month of payment on the FPS (if the employer does not provide a new start date and declaration). No further action is needed by the employer or employee.
What happens if the irregular payment indicator is set, but the employee changes their working pattern and is now paid regularly?
If an employee’s working pattern changes and is now paid regularly (or is reported on each regular FPS), the irregular payment indicator should be removed on future FPSs.
If an employee is reported on a monthly FPS, but with no pay for the period, does the irregular payment indicator also need to be set? Of if they’re being reported on a monthly FPS is that enough to ensure HMRC do not close the employment?
If an employee is reported on a FPS every month, with pay in this period as £0 and correct year to date figures, then the irregular payment indicator should not be set, as HMRC will not treat them as having left that employment in this case.