The ATT is pleased to report that the fix put in place to allow Employers to change the status of their PAYE schemes under RTI to ‘annual’ seems to be working.
Since April there had been a bug in HMRC’s systems preventing HMRC from processing applications for schemes to be treated as annual schemes.
Requests that have been made by employers since April 2013 will now be processed. Unfortunately HMRC will not be notifying the employer when the change has been made, so the employer, or his agent, will not be aware when they can stop making monthly EPS/nil activity submissions without checking with HMRC.
An annual scheme must meet all of the following requirements:
- all the employees are paid annually;
- all the employees are paid within the same, single tax month; and
the employer is only required to pay HMRC annually.
- We understand that HMRC are implementing these requirements strictly.
Submitting Employer Payment Summaries (EPS)
Once a business is registered as an annual scheme, an Employer Payment Summary (EPS) is not required for the 11 months of the tax year where no payments are made to the employees.
Please note that a Nil EPS/Period of inactivity EPS needs to be submitted for each month until the registration has been accepted as an annual scheme.
If, prior to RTI, the employer operated an annual PAYE scheme, then HMRC Debt Management Systems should already have a record of the month the employer is due to make a payment to HMRC, based on the previous year’s payment.
Changing the date of payment to employees
If an existing annual employer changes the date/month of the payment to the employee(s) then the action required will depend upon whether the new annual payment is in an earlier or a later month. In response to some questions from the CIOT, HMRC have provided some examples of how this would work, based on an employer with an annual scheme that currently pays in December (month 9).
a. Employer wants to change the payday for all employees to an earlier tax period – October (month 7)
- The employer should submit an FPS on or before payment in October and no later than 5th November;
- No FPS should be submitted in month 9 (the original payment month); and
- No nil EPS is required for tax periods where no payment is made
b. Employer wants to change the payday for all employees to a later tax period – March (month 12)
- The employer should submit a nil EPS for December (month 9) tax period by 19th January (as HMRC systems were expecting a return);
- FPS should be submitted on or before payment to employees in March (month 12) and no later than 5th April; and
- No nil EPS is required for the intervening tax periods where no payment is made.
A Nil EPS clears the expectation of a FPS, but does but does not count in the decision making process on whether the employer has an annual scheme or not; only an FPS does that. On receipt of the FPS HMRC’s systems will change the annual payment/filing month over to the new month.
More than one payment in a tax year
If an employer pays an employee or employees, and, submits more than one FPS, for more than one payment in a tax year, then HMRC will automatically cancel the annual payer status for that year, and all subsequent years.
HMRC will write to the employer advising them that the annual payer status has been cancelled and Debt Management will revert back to expecting payment/filing on a monthly basis.
Practical tip: Many employers choose March as the month of payment to ensure that all payments for the year can be made in this month, even if an employee/director joins part way through the year.
Non-annual schemes and Nil payments in a month
Schemes not registered as annual schemes should submit a Nil EPS/Period of inactivity EPS for each month as usual.
If any members continue to have problems with reporting in this area, please send comments to John Kimmer at jkimmer [at] att.org.uk.