FPS adjustment – Reconcile the liability adjustment after amending NI category

The common cause of confusion is due to the employee’s and employer’s national insurance values. The FPS adjustment removes all NI values from the previous NI category, while submitting the new values.

This is done by refunding the year to date (YTD) value processed against the original NI category for any periods that were incorrect. The adjustment also includes the value against the new NI category in the current period.

The calculation to reconcile your liability differs depending on whether you rolled back part of the tax year, or all of it. Select the relevant option below to find out more:

▼ I've rolled back the full year

The liability that the FPS adjustment wizard shows uses four pieces of information:

The new YTD value of employee contributions on the original NI category, this is a negative value.
The new YTD value of employer contributions on the original NI category, this is a negative value.
The employee contributions for the current period on the new NI category.
The employer contributions for the current period on the new NI category.

Using the information above, the FPS liability calculation is A + B + C + D.

NOTE: Keep in mind, that A and B are negative values.

Any other values that HMRC require on the adjustment are accounted for in YTDs in the background of the submission.

▼ View an example reconciliation

I've processed my employee on NI category A for the entire year. I've found out that the employee should've been on NI category D. I've rolled back my employee, reprocessed and I'm now submitting my FPS Adjustment, however, the value on the adjustment looks wrong.

Answer

You can access the four values to reconcile the liability adjustment from the following areas:

The Payment Summary History Part 1 – By Date report
The FPS Viewer

Payment Summary History Part 1 - By Date

In this example, the report shows that the Employee NIC for the current period was £86.07 (value C) and the Employer NIC for the current period was £80.75 (Value D).

This gives us a primary liability of £166.82 however we must still account for the new YTD value of the contributions on the original NI category.

In this example, the entire year has been reprocessed so there are now no YTD contributions on the original category. The FPS adjustment needs to show HMRC that the previously submitted values are no longer applicable. We can get these values from the HMRC reconciliation by viewing the last submitted FPS.

The FPS Viewer

Use the FPS Viewer to check the YTD value on the original NI category.

TIP: To view the NIC YTD values, you need to select to view them using the Columns button at the top-right corner of the FPS Viewer screen.

In this example, the original NI category A YTD for the employee was £601.92 and it is now £0.00. This means the FPS adjustment will submit a liability adjustment of -£601.92 (Value A).

The original NI category A YTD for the employer was £692.22 and it is now £0.00 so the FPS adjustment will submit a liability adjustment of -£692.22 (Value B).

Using the formula A + B + C + D, we can calculate the total liability adjustment is:

-£601.92 + -£692.22 + £86.07 + £80.75 = -£1127.32

▼ What if I've only rolled back part of the year?

In this scenario, the FPS liability calculation uses the following four values:

The difference between the YTD employee contributions from the last period they were correctly on the original NI category, and the last period you submitted before making any corrections. This is a negative value.
The difference between the YTD employer contributions from the last period they were correctly on the original NI category, and the last period you submitted before making any changes. This is a negative value.
The employee contributions for the current period on the new NI category.
The employer contributions for the current period on the new NI category.

Using the information above, the FPS liability calculation is A + B + C + D.

NOTE: Keep in mind, that A and B are negative values.

Any other values that need to be submitted on the adjustment are accounted for in YTDs in the background of the submission.

To get the YTD figures, compare the last FPS when they were on the correct NI category to the last FPS before you rolled back.

TIP: To view the NIC YTD values, click the Columns button in the top right of the FPS Viewer and select this option.

For example:

You processed an employee on Category A in Months 1-7
In Month 5 they should have been changed to Category C, but weren't

The last month they were on Category A correctly was Month 4. Use the YTD values in the Month 4 FPS, compared to the YTD values from the Month 7 FPS to work out the difference.

▼ View an example reconciliation

This employee was processed on Category A up to month 7, when they should have been changed to Category C in month 5. They've been rolled back and reprocessed on Category C from month 5 onwards, and the FPS Adjustment liability is -£571.28.

To reconcile this, you need to compare the Month 4 FPS to the Month 7 FPS to work out the difference in the YTDs.

Month 4 FPS

The YTD values from month 4 when they were last correctly on the original NI Category (A) are in the FPS viewed for the M4 submission:

The Employee YTD value was £304.64 an the employer YTD value was £685.60.

Month 7 FPS

We can also get the YTD values for the last FPS before any reprocessing:

The employee YTD was £533.12 and employer YTD was £1,199.80.

Therefore the difference in the YTD values for the original NI Category is:

Employee NIC YTD = £304.64 – £533.12 = -£228.48 (Value A)
Employer NIC YTD = £685.60 – £1,199.80 = -£514.20 (Value B)

Next, add these to the NI contributions for the employee and employer on the new NI category, for the current period. Check this using a report such as the Payment Summary History Part 1 – By Date:

In Month 7, for Category C, the employee’s NI contribution is 0 (Value C), and the employer’s NI Contribution is 171.40 (Value D).

Therefore the total FPS Adjustment liability is:

A + B + C +D = Liability

-£228.48 – £514.20 + £0.00 + £171.40 = -£571.28