HM Revenue & Customs (HMRC) has initiated a consultation on revising the rules for reporting salary advances. These changes are poised to significantly ease administrative tasks and cut expenses for employers.
Currently, salary advances are considered as prepayments of earnings, requiring employers to file extra Real Time Information (RTI) reports.
According to existing laws, specifically Regulation 67B and Schedule A1 of the Income Tax PAYE Regulations 2003, such payments must be reported to HMRC on or before the payment date.
Key amendments on the horizon
HMRC’s consultation outlines changes that would permit employers to defer the reporting of a salary advance until the remaining salary for that period is paid, given certain conditions are met. The primary changes proposed include:
- A unified and straightforward method for employers to report salary advances
- A reduction in administrative tasks, as additional reports to HMRC would no longer be necessary
Minimising errors and boosting efficiency
HMRC recognises that extra filings can complicate matters, increasing the likelihood of errors in PAYE coding or Universal Credit calculations.
The proposed amendments aim to mitigate these risks by streamlining the reporting mechanism. This will not only reduce errors but also free up valuable time and resources for employers.
Uniformity and clarity
The new guidelines will offer employers clear instructions on how to report advance payments, ensuring a consistent approach across various businesses.
Constraints
The proposed changes will not be applicable to employees with payment intervals shorter than a week or longer than a month. Additionally, these changes are not designed to affect other PAYE/RTI procedures.
In summary, HMRC’s proposed alterations to the reporting of salary advances are a positive development for businesses.
They are expected to alleviate administrative pressures, reduce costs, and lower the risk of errors, thereby enhancing overall efficiency. The consultation is set to conclude on 9 October 2023, after which more details are expected to be released by HMRC.