This technical consultation seeks views on proposed amendment regulations, which allow employers to delay reporting an advance payment of salary made to an employee until payment of the remainder of that salary instalment, where certain conditions are met.

This change will impact employers, who would otherwise have to report the advance and regular payment of salary to HMRC separately. It will give clarity to employers on how to report advance payments to employees and means they will only have to report once. This will cut costs for companies using payroll bureaus who are often charged one-off fees for this type of administrative process.

It should also reduce errors as HMRC acknowledged that ‘additional returns may also impact on HMRC processes, such as the risk of PAYE coding or Universal Credit errors’.

Under current legislation, these advance payments are treated as a payment on account of earnings. This means that employers must submit additional real time information (RTI) reports to record these advance payments.

For income tax in respect of PAYE (Pay As You Earn) Income, Regulation 67B and Schedule A1 of the Income Tax PAYE Regulations 2003 set out requirements for reporting relevant payments (including salary advances) to HMRC. On the basis of the current legislation, salary advances must be reported on or before the date they are paid.

The proposed amendments are intended to simplify the process for employers who pay salary advances. To ease the administrative burden, employers will be able to delay reporting a salary advance to HMRC’s RTI system until the payment of the remainder of that salary instalment.

The proposed amendments will:

• give employers a clear and consistent approach in reporting salary advances to HMRC; and
• ease the administrative burden for employers, who will not need to submit extra reports to HMRC.

The amendments are intended to simplify the reporting of salary advances. They are not intended to impact on other PAYE/RTI processes. The amendments will also not apply where the employee’s normal payment interval is less than a week or more than a month.