RTI REPORTING - 22.10.2018

Getting the FPS right

Who should be included? The legislation requires that an employer sends a full payment submission (FPS) for every employee who has been paid, even if they are earning below the lower earnings limit (£116 per week for 2018/19) or if they are casual employees. There is no concept of just ignoring small amounts as cash in hand. If this were the case the individual could have numerous sources of income that were not being declared that overall would incur a tax and NI liability, and could also be claiming state benefits fraudulently by suppressing their income.

What’s the deadline? The FPS should be sent on or before the date of payment shown in the file. It’s supposed to be the contractual date of payment, not the date the employee is physically paid. HMRC often forgets to make it clear in guidance the importance of using the correct date if the contractual payment date falls at a weekend or bank holiday.

Pro advice. Where this happens and you pay employees on the first banking day before the weekend or holiday, you must leave the payment date showing as the weekend or bank holiday. This ensures that if the employee is claiming Universal Credit that the earnings go into the correct award period. Don’t report the earnings after the weekend as that’s a breach of contract, as well as causing problems for Universal Credit.

Payments you can ignore. If an employee performs duties outside their contract of employment, it’s possible to argue that these are not taxable as earnings. But it could be quite tricky to prove that there is no “supervision, direction or control”, which are the very basic tests you would need to demonstrate a self-employed arrangement that can be paid gross.

Can you ignore gifts? If gifts are related to a personal matter rather than the performance of the contract then “yes”. For example, an employer might provide a wedding gift to an employee, or something for achieving long service. These are not related to the performance of the contract so aren’t taxable or NIable. There are still rules - a wedding gift needs to be reasonable and proportionate. To be tax-exempt long service gifts can’t be given earlier than 20 years and be worth no more than £1,000 at that point.