I lose track of the number of times that HMRC have written about what payment date should be declared on the RTI Full Payment Submission (FPS). We could go right back to February 2015’s Employer Bulletin and the many in between that have given different and conflicting views on what the date should be.
This is a field (field 43) that is declared on the FPS. It is not the same as the payday, it is not the date that the FPS was submitted and is not the date that the payroll was run. It is a totally separate field that is not related to any of these dates.
The payment date has two main purposes:
(1) It regulates the Universal Credit Assessment Period
Each Universal Credit (UC) claimant has an Assessment Period. This starts on the date that someone makes their UC claim and lasts for one calendar month. Each Assessment Period is individual to the claimant.
The Department for Work and Pensions (DWP) look at all of the claimant’s earnings in the Assessment Period to regulate the person’s entitlement or non-entitlement to the Credit for the following month’s payment.
Say an individual has an Assessment Period that runs from the 24th of one month to the 23rd of the next. In August 2019, the DWP will look at all earnings declared in the calendar month from 24 July to 23 August.
If the employee is paid on a monthly payroll that pays on the 23rd of the month, the earnings that are taken into consideration are the ones between the payment date of 24 July and payment date 23 August.
If the August FPS had correctly assigned a payment date of 23 August (and July’s had correctly declared 23 July), the earnings that will regulate the Universal Credit are the earnings paid on 23 August, as the 23rd of July falls into the previous Assessment Period.
(2) It tells HMRC whether or not the FPS was filed late
Confusingly, legislation says that the FPS has to be filed on or before the employee is paid.
However, HMRC use the payment date to determine whether the FPS has been filed late. So, in the above example, if the employee is paid on 23 August 2019, the employer has a legal obligation to file the FPS on or before this date.
If the payment date on the FPS is also 23 August 2019, HMRC’s systems will recognise that filing is on time if the FPS is received on or before 23 August 2019.
If the payment date in August is incorrectly declared as 13 August 2019, even though the employer has filed the FPS on or before payday, HMRC’s systems will recognise that it has been filed late, as the date of receipt at HMRC is after the payment date.
So, there are two reasons that the payment date is correctly completed:
- DWP’s UC Assessment Period and
- HMRC’s late filing penalty regime
So what date is it?
The August 2019 Employer Bulletin said the following on page 2:
Accurate and timely reporting of payroll is really important. This is because it helps to make sure that your employee pays the right amount of tax. The information is also linked to Universal Credit which is designed to increase the financial benefits of work and provide employers with a more flexible workforce…
The payment date you report on your Full Payment Submission must be on or before the date you pay your employees, not the payroll run date, or another date from your payroll system. Incorrect recording of this date is one of the most common reasons for the issue of a late filing penalty.
This is absolutely not correct.
The payment date is the date on which the employee is contractually entitled to be paid. So, in the above example, the payment date would be 23 August – in fact, if their contract says that they will be paid on the 23rd of the month then the payment date will always be the 23rd, regardless of whether the 23rd falls on a non-banking day and payday is brought forward.
In most cases, the payment date will be the same as the payday. However, there will be always be times when the payday is changed.
Let’s assume the following
- The employee’s Universal Credit Assessment Period runs from 25th of one month to the 24th of the next
- The contractual payday is 25th monthly
In August 2019, the employer is likely to bring forward the payday to the 23rd given that the 25th is a Sunday.
If the employer follows HMRC’s advice, the employer would declare 23 August 2019 as the payment date. If they also declared 25 July 2019 as the payment date in that month, the DWP would look at the earnings in the Universal Credit Assessment Period (25 July to 24 August) and see that the employee has received two lots of earnings – one on 25 July and one on 23 August.
If the payment date had been correctly stated as 25 August 2019, the DWP would not have made this incorrect calculation.
Don’t follow this HMRC guidance!
Time after time, HMRC have failed to understand the importance of the payment date for Universal Credit purposes. To publish this guidance in the Employer Bulletin is unfair to claimants and confusing for employers.
Given that the latest statistics, published 13 August 2019, say that there are 2.3 million people on Universal Credit, 33% of whom are in employment, we have a responsibility to get this information right.
The payment date is the date that the employee is contractually entitled to be paid. It is not any other date from your payroll system.
I have written to HMRC who replied as follows:
‘Just to follow up on your email from Monday, the team responsible for the article have your comments on board and the intention is to provide further clarification in our next Bulletin.’
I almost dread what the next Bulletin in October will say!