Many will have attended updates, seminars and courses (including those given by me) that talked about the end of the Earlier Year Update (EYU) from 2020. Although given in good faith, a recent announcement from HMRC has consigned this information to the ‘fake news’ pile…….
Earlier Year Update (EYU) to End
On 29 November 2018, HMRC’s Software Developer Support Team (SDST) wrote to developers announcing the extension of the Full Payment Submission (FPS) from 20 April 2019. From tax year 2018/19, where payroll data was reported incorrectly to HMRC and was not amended before 19 April 2019, employers could use either:
- The existing EYU functionality for that tax year or
- Report revised Year to Date (YTD) payment data on a ‘Month 13 FPS’
So, far tax year 2018/19, from 20 April 2019 the employer had a choice of whether to make corrections to the previous year’s submissions via the EYU or the Month 13 FPS. This was to be the pilot year. Of course, this was depending on whether the payroll software contained this functionality.
The November 2018 announcement said to developers that ‘amendments to the tax year ending 05 April 2020 (and future years) from 20 April 2020 – will be made by the submission of an FPS’.
In short, 2018/19 was the pilot / trail year for the EYU and the new Month 13 FPS, however, the EYU would be gone for amendments to tax year 2019/20 and onwards.
Earlier Year Update (EYU) NOT to End
On 20 August 2019, SDST wrote to developers as follows:
‘We previously advised that from 20 April 2019 we would be accepting Real Time Information (RTI) Full Payment Submissions (FPS) with ‘Year to Date’ information to make amendments to the tax year ending 5 April 2019. In order to evaluate the making of amendments using the FPS, we decided to pilot its use while continuing to accept Earlier Year Updates (EYU) to make amendments for 2018-19 where employers chose to do so. We originally advised that from April 2020, the EYU would no longer be a valid submission for 2019-20 and later years.
The initial analysis from the RTI FPS ‘Year to Date’ pilot has been very encouraging. We want to continue to evaluate these early positive results prior to making a final decision about withdrawal of the EYU. We have therefore decided to extend the pilot to include the 2019-20 tax year.’
Putting it all Together
We predicted, reported and hoped for the end of the EYU too soon. So:
- For the tax year ending 05 April 2019, from 20 April 2019 – either the EYU or Month 13 FPS will be accepted. This is a pilot year and use of the Month 13 FPS is voluntary
- For the tax year ending 05 April 2020, from 20 April 2020 – either the EYU or Month 13 FPS will be accepted. This is an extension to the pilot year and, again, the use of the Month 13 FPS is voluntary
Why the postponement?
HMRC say that their initial analysis of the pilot year has been ‘very encouraging’, yet obviously not encouraging enough to have the confidence and fully withdraw the EYU. Hence the extension to the pilot year. Which is a shame, as the April 2019 Employer Bulletin reported that the change would ‘simplify the process and align HMRC systems with employer payroll records’. I am all for simplification and ensuring that HMRC’s systems hold the same information that employers hold on their payroll systems.
Although, to be fair, maybe we should have paid have read the article more carefully as it contained the caveat that the demise of the EYU from 2019/20 would only be carried forward ‘if the trial is successful’.
It obviously hasn’t been, so the EYU is here for another year and SDST have issued software update specifications to developers.