Navigating Early Employee Payments in December: HMRC Reporting Requirements

For many employers, December brings unique payroll challenges, particularly when it comes to reporting employee payments to HMRC. Understanding the Real Time Information (RTI) requirements is essential to ensure compliance and avoid penalties.

Understanding RTI Reporting Deadlines

Under RTI, employers are obligated to report employees’ pay and deductions to HMRC electronically through the Full Payment Submission (FPS) at or before the time payment is made to the employee. Failure to adhere to these deadlines more than once in a tax year can result in penalties. While HMRC offers a three-day grace period, this is more of a concession and should not be routinely depended upon.

Special Considerations for December Payments

December often prompts employers to pay their employees earlier than their usual payday, whether due to bank holidays, business closures, or as a gesture of goodwill. In 2019, HMRC introduced an easement for employers paying their employees early during the Christmas period.

HMRC’s Easement for Early Christmas Payments

This easement allows employers to report pay and deductions using their usual or contractual pay date in the FPS, rather than the actual early payment date. The key is to ensure the FPS reaches HMRC by the usual payday. This reporting approach is considered timely by HMRC, even if the payment to employees occurs earlier. This easement aims to safeguard employees’ Universal Credit entitlements.

Practical Example

Consider an employer whose standard practice is to pay employees on the last Friday of the month, with December’s payday falling on 29 December 2023. If the employer decides to close for Christmas week and pay employees on the last working day before the break, which is 22 December 2023, they must still report the payment date as 29 December 2023. As long as the FPS is submitted by this date, HMRC will regard it as filed on time.

Conclusion

Adhering to HMRC’s reporting requirements, especially during the festive season, is crucial for employers. This ensures compliance and protects employee benefits while accommodating the seasonal adjustments in payroll. For any uncertainties or assistance with payroll reporting, it’s advisable to seek professional guidance.

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