Universal credit: RTI and Universal Credit
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.
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 £116 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.
Employers will need to send submissions to HMRC. There are two types of submission – an FPS (Full payment submission) and EPS (Employer payment summary).
Under the legislation, 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). HMRC do allow departure from the strict rules in the legislation in certain cases such as when the regular date for payment falls on a non-banking day and, for 2018, where employers have paid early due to Christmas. Section 1.8 HMRC guidance states that where a regular payday falls on a non-banking day (Saturday, Sunday or bank holiday) and, because of this, payment is made on the last working day before the regular payday or next working day after the regular payday, the date reported on the FPS submission should be the payment due date.
The FPS submission 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.
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.
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.
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’:
- The amount of their employed earnings for that assessment period is to be based on the information which is reported to HMRC for PAYE purposes and is received by the Secretary of State from HMRC in that assessment period
- Where no information is received in an assessment period from a real time information employer - the amount of earnings is to be treated as nil.
However this general rule does not apply:
- In respect of any assessment period where the Secretary of State considers that the information from the employer is unlikely to be sufficiently accurate or timely or
- In respect of any assessment period where:
- No information is received from HMRC and DWP consider this is because of a failure of the employer to report the information to HMRC or a failure of the HMRC computer system or
- DWP considers that the information received from HMRC is incorrect, or fails to reflect the definition of employed earnings in the UC regulations, in some material respect
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.
Last reviewed/updated 8 January 2019