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What date to use when processing under Real Time Information (RTI)

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Summary

Under RTI, the deadline for submitting a Full Payment Submission (FPS) is on or before the date the employees are paid. HMRC use the pay date contained in the submission to determine if you've submitted late or not, so it's important that you understand what this means to you and your employees.

Description

HMRC state that when you calculate PAYE and NI you should calculate them 'when you actually make the payment', and that 'the point of the payment is when the earnings are places unreservedly at the disposal of the employee', which is when the employees receive their money. The only way to do this in Sage Instant Payroll is to set the pay date to the date the employees actually get paid. For further information about this, please refer to HMRC Employer Further Guide to PAYE and NICs.

If you submit your FPS after the date your employees receive their pay, you're prompted to select a late reason before you can complete the submission. Read more

For HMRC guidance on submitting RTI information, visit www.hmrc.gov.uk

Resolution

Non banking days

In Sage Instant Payroll, you need to use the date the employees actually receive their wage as your pay date - with one important exception, non banking days.

For example, you pay employees on 25th of each month but in October 2020 this lands on a Sunday. In this scenario, if you actually make payment to your employees on the previous banking day, the Friday, you must:

  • Set your pay date as your normal pay date, this would be the non banking day, Sunday 25th.
  • Process payroll and pay employees on the previous banking day, Friday 23rd.
  • Submit your FPS on or before the previous banking day, Friday 23rd.

If changing your pay date causes you an issue such as missing a tax period, or stops you from being able to update a period, for guidance on what to do, please refer to the Workarounds section.

 

Workarounds

There may be situations when changing your pay date to align with the date your employees are paid means you either miss a tax period, or you need to process an employee twice in the same period.

If the pay date and the date your employees receive their money fall into different tax periods, you must correct this before making your next FPS to HMRC.

There are two scenarios that could result in this happening when you move your pay date:

  • You make 11 payments in 12 periods - you have too many too many tax periods compared to payments. This results in missing a tax period.

Action: If the employee earns over the lower earnings limit (LEL), you must adjust the employee's year to date (YTD) LEL figures to ensure the employee has the correct LEL value for all periods.

If the employee's earnings are below the LEL, you don't need to increase the LEL values.

  • You make 13 payments to your employees in 12 periods - you have too many payments to fit into the number of tax periods. This results in you not being able to update a period.

Action: You need to make two payments in a single period.

 

Examples and scenarios

Below are some examples with more information about the action you should take if one of the above scenarios affects you.

Changing your pay date to match your payment date means you miss a tax period
Weekly

If aligning your pay date to the payment date means you miss a tax period, you should process payroll as normal and ignore any warnings about missing a tax period. Then, before you submit the FPS for that period, you must manually increase the Earnings up to LEL value in the employees' records by the relevant amount:

  • Weekly - £120
  • Fortnightly - £240
  • Four Weekly - £480

For example, you process your payroll and set your pay date to a Wednesday but pay your employees on the following Monday. Under RTI, you must set your pay date to when the employees are paid, which in this example is Monday. However, in the 2020/2021 tax year, Wednesday and the following Monday are in different tax weeks.

You're about to process payroll and you normally set your pay date to Wednesday 10 June, week 10, and pay your employees on Monday 15 June, week 11. As you need to change your pay date to Monday 15 June, tax week 10 will be missing.

To resolve this, set your pay date to Monday 15 June and process your payroll as normal. Once you've updated your payroll, before submitting the FPS, you must manually increase the Earnings up to LEL in each employees' record by the relevant value, as mentioned above. In this example, because the employees are paid weekly, you increase it by £120.

To increase each employee's Earnings up to LEL, click Employee, click Maintain year to date information, click the NIC tab, manually add the relevant value to the Earnings at the LEL box, click Save details then click Close Year to Date screen. Repeat this until you've updated each employee.

You can then submit your FPS for this period. From the next pay period you can continue to process using the correct pay date.

Employees with a director status of Director are unaffected as their NIC is calculated cumulatively and not on a period basis. If you miss or advance a tax period for a Director, the NIC calculates correctly based on the yearly NIC thresholds.

 

Monthly

If aligning your pay date to the payment date means you miss a tax period, you should process payroll as normal and ignore any warnings about missing a tax period. Then, before you submit the FPS for that period, you must manually increase the Earnings up to LEL value in the employees' records by the relevant monthly amount. In 2020/2021 this is £520.

For example, you normally process your payroll on and set your pay date to Friday 31 July, month 4, but you don't pay your employees until Thursday 6 August, month 5. As you need to change your pay date date to Thursday 6 August, month 4 will be missing.

To resolve this, you should set your pay date to Thursday 6 August, and process your process as normal, ignoring any warnings about missing a tax period. Once you've updated your payroll, if the employee earns above the LEL, before submitting your FPS you must then manually increase the employees' Earnings up to LEL values by £520.

If the employees' LEL is zero due to not earning above the LEL, you don't need to increase the LEL and should leave it at zero.

To increase each employee's Earnings up to LEL, click Employee, click Maintain year to date information, click the NIC tab, manually add the relevant value to the Earnings at the LEL box, click Save details then click Close Year to Date screen. Repeat this until you've updated each employee.

You can then submit your FPS for this period. From the next pay period you can continue to process using the correct pay date.

Employees with a director status of Director are unaffected as their NIC is calculated cumulatively and not on a period basis. If you miss or advance a tax period for a Director, the NIC calculates correctly based on the yearly NIC thresholds.

 

Changing your pay date means that you can't update a period

Weekly

You set your pay date to Monday but pay your employees the day before the weekend, on Friday. Under RTI, you must set your pay date to when the employees are paid, which in this example is the Friday. However, in the 2020/2021 tax year, Fridays and Saturdays are in different tax weeks.

For example, you process on and set your pay date to Monday 20 July, week 16, and pay your employees on Friday 17 July, week 15. You can't move your pay date to Friday 17 July because week 16 has already been updated when you processed last week on Monday 13 July, week 15.

To resolve this, because you're processing a tax period ahead, you need to pay two periods in one to ensure you process correctly from the start of the new tax year.

Example:


Tax weekPay dateDate employees get paid
AWeek 16Monday 20 JulyFriday 17 July
BWeek 16Friday 24 JulyFriday 24 July
CWeek 17Friday 31 JulyFriday 31 July
DWeek 18Friday 7 AugustFriday 7 August
  • To be able to use Friday 24 July as the pay date, B, you need to rollback or restore week 16, that was processed in A, then reprocess using Friday 24 July as the pay date. You need to include the pay from A and B when reprocessing, paying the employee two weeks salary. You can then setup a post tax post NI deduction for the salary the employee already received on Friday 17 July.
  • If you rollback or restore to process twice in one period, you must submit an FPS adjustment to notify HMRC of the difference. Read more

Monthly

You set your pay date to the 6th of the month but pay your employees the day before, on the 5th. Under RTI, you should move your pay date to when the employees are paid, which is the 5th. However, the 5th and 6th are in different tax months.

For example, you process on and set your pay date to Wednesday 6 May, month 2, and pay your employees on Tuesday 5 May, month 1. You can't move your pay date to Tuesday 5 May because month 1 has already been updated when you processed last month on 6 April, month 1.

To resolve this, because you're processing a tax period ahead, you need to pay two periods in one to ensure you process correctly from the start of the new tax year.


Tax monthPay dateDate employees get paid
AMonth 1Wednesday 6 AprilTuesday 5 April
BMonth 1Tuesday 5 MayTuesday 5 May
CMonth 2Tuesday 5 JuneWednesday 5 June
  • To be able to use Tuesday 5 May as the pay date, B, you need to rollback or restore month 1, that was processed in A, then reprocess using Tuesday 5 May as the pay date. You need to include the pay from A and B when reprocessing, paying the employee two months salary. You can then set up a post tax post NI deduction for the salary the employee already received on Tuesday 5 April.
  • If you rollback or restore to process twice in on period, you must submit an FPS adjustment to notify HMCR of the difference. Read more

 

 

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