Universal credit: RTI and Universal Credit

What is Real Time Information?
What must be reported?
How does an employer report RTI information?
Exceptions to RTI
Why is RTI important for UC?
How is RTI data used for UC?

What is Real Time Information?

Becoming an employer comes with certain obligations in respect of tax and national insurance. Generally employers are tasked with collecting tax and national insurance from their employees pay and sending that money to HM Revenue and Customs (HMRC).

In the past, HMRC required employers to send payments of tax and NI to them frequently and then report those figures after the end of each tax year on a series of forms.

On 6 April 2013, HMRC introduced a new system of real time reporting for employers. It is often called the RTI (Real Time Information) system.

It means that employers must send details to HMRC at the time they pay their employees. This information must be sent to HMRC electronically as part of their routine payroll process.

What must be reported?

Employers must report payroll information to HMRC. This includes the employees pay, tax and deductions. Employers will need to report details of all employees they pay, no matter how much they are paid and how often they are paid (for example once a year).

(However if ALL employees are paid below the NIC Lower Earnings Limit of £112 per week AND that employment is their only job an employer will not strictly have to register a PAYE “scheme” and thus no RTI submissions will be due), More information is available on the GOV.UK website.

How does an employer report RTI information?

Employers will need to send submissions to HMRC. There are two types of submission – an FPS (Full payment submission) and EPS (Employer payment summary).

An FPS must be sent to HMRC on or before the date of payment to the employee (although there are limited exceptions to this when it can be sent later).

. It records the year to date figures of tax, national insurance and pay and also the totals for that particular pay period.

The EPS submission is used when employers need to recover statutory payments (such as sick pay, maternity pay etc.) and are also used if there is a nil payment due for the month (as no FPS submission will be made).

The FPS submission will include a great deal of information about the employee including the range of hours they work. You can find out the full details included in an FPS on the GOV.UK website.

Exceptions to RTI

Care and support employers are able to submit PAYE information to HMRC using paper rather than online. They must to contact HMRC if they want, or need, to do this.

If an employer is "digitally excluded", that is that they are unable for whatever reason to access the internet and do things online they can to ask HMRC for permission to continue with paper filing.

Certain religious groups, whose beliefs are incompatible with the use of electronic methods of communication may also be exempt from online filing requirements.

More information is available on the GOV.UK website.

Why is RTI important for UC?

HMRC will be sending the data that they receive from employers to DWP. This will enable DWP to use RTI data about a claimant’s employed earnings to adjust UC awards each month.

How is RTI data used for UC?

The general rule is that where a claimant is, or has been, engaged in an employment in respect of which their employer is a ‘real time information employer’:

However this general rule does not apply:

Where any of these exceptions apply, DWP must make a decision as to the amount of the person’s employed earnings for the assessment period in accordance with the UC regulations using such information or evidence as the DWP thinks necessary.

When this is done, DWP can treat a payment of employed earnings received by the person in one assessment period as received in a later assessment period. This might happen where DWP have received the information in that later period or would, if RTI had worked correctly, have expected to receive information from HMRC in that later period.

If the same earnings are then notified at another point by HMRC after they have already been taken into account due to the operation of these exceptions, the regulations allow DWP to ignore the HMRC information.

It is not yet clear how this will work in practice, particularly in relation to the exceptions.

Updated 20 April 2017