HM Revenue & Customs (HMRC) has recently launched a consultation on new rules aimed at simplifying the reporting of salary advances.
This change is expected to have a significant impact on employers, streamlining administrative processes and reducing costs.
Under existing legislation, salary advances are treated as a payment on account of earnings. Employers are required to submit additional Real Time Information (RTI) reports to record these advance payments.
For income tax in respect of PAYE income, Regulation 67B and Schedule A1 of the Income Tax PAYE Regulations 2003 set out the requirements for reporting relevant payments, including salary advances, to HMRC. These must be reported on, or before, the date they are paid.
The proposed changes
The technical consultation by HMRC proposes amendments that will allow employers to delay reporting a salary advance until the payment of the remainder of that salary instalment, provided certain conditions are met.
The key proposed amendments should ensure that:
- Employers will have a clear and consistent approach to reporting salary advances to HMRC.
- The administrative burden for employers will be eased, as they will not need to submit extra reports to HMRC.
Reduced errors and increased efficiency
HMRC acknowledges that additional returns can impact processes, such as the risk of PAYE coding or Universal Credit errors. The new rules aim to reduce such errors by simplifying the reporting process.
Clarity and consistency
The new rules will provide clarity to employers on how to report advance payments, ensuring a more consistent approach across the board.
Amendments will not apply where the employee’s normal payment interval is less than a week or more than a month. They are also not intended to impact other PAYE/RTI processes.
The proposed changes by HMRC to simplify the reporting of salary advances are a welcome move for businesses.
The consultation process closed on 9 October 2023, so more information should be released by HMRC shortly.
If you would like more information and advice about how the proposed changes could impact your business, please reach out to us today.