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RTI End of Year
Processing
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While every care has been taken in the accuracy of the compilation of this document, the text is for guidance only. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this document can be accepted by the publishers. The material contained does not affect any right of appeal
on matters about a taxpayer’s own tax liability.
This is an uncontrolled document and, although current at the time of issue, will not be updated.
Contents
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CONTENTS Page
SECTION 1: END OF YEAR PROCESSING ... 4
1.1 WHAT HAS NOT CHANGED ... 4
1.1.1 THE P60... 4
1.1.2 P9D AND P11D ... 4
1.1.3 FORM P11D(B) AND CLASS 1ANICS... 4
1.2 WHAT HAS CHANGED... 5
1.2.1 P14S AND THE P35 ... 5
1.2.2 FINAL SUBMISSION OF THE YEAR... 5
1.2.3 THE DECLARATION AND QUESTIONS... 5
1.3 CORRECTIONS... 6
1.3.1 FINAL SUBMISSION INDICATOR OMITTED... 6
1.3.2 CORRECTIONS AFTER THE FINAL SUBMISSION... 6
1.3.3 THE EARLIER YEAR UPDATE... 7
Pension Refunds ... 7
1.3.4 MORE THAN ONE FINAL SUBMISSION? ... 8
1.4 PENALTIES ... 8 1.4.1 2013/14 ... 8 Late Returns ... 8 Late Payments... 8 1.4.2 2014/15 ... 9 Late Returns ... 9 Late Payments... 9 1.5 DEADLINES ... 10
SECTION 1:
END OF YEAR PROCESSING
This guide will lead users through the process of completing their year-end under RTI and is based upon current HMRC guidance.
1.1 WHAT HAS NOT CHANGED
1.1.1 The P60
The P60 summarises an employee's total pay and deductions for the year. The employer needs to provide a form P60 (either paper or electronic) to each employee on the payroll, who was working on the last day of the tax year, i.e. 05 April. It is a legislative requirement that the P60 is provided by 01 June (i.e. the employee must have this by 31 May).
If:
• an employee has had more than one period of employment during the tax year, only provide the employee with one P60 - for the period of employment up to and including 05 April
• an employee had a previous job in the year and gave a P45 with earnings and tax from the previous employment, provide the pay and tax in the ’previous employment' field
• an employee asks for a copy P60, this can be issued. There is no longer a requirement to mark this ‘duplicate’
• an amendment is necessary to the original P60, the employer must give the
employee details of the amendment. This can either be done via a letter or by issuing a new P60 marked ‘REPLACEMENT’
1.1.2 P9D and P11D
Forms P9D and P11D relate to any benefits and expenses that have been paid or provided to an employee, i.e. company cars, medical benefits etc. Regulation 94 of the Income Tax (Earnings and Pensions) Act 2003 gives the following deadlines that employers must adhere to. If:
• the employee is still employed, the P9D / P11D must be provided to them before 07 July (i.e. on or before the 6th)
• the employee was employed at 05 April but left before 07 July, the P9D / P11D must be posted to their last known address by 07 July
• the employee left before 05 April, the employee must request the P9D / P11D. This must be sent before 07 July or within 30 days of receiving the request, whichever is the later
Regardless of whether the employee is still employed, the employer must send all P9D / P11D forms to HMRC before 07 Jul, i.e. no later than 06 July.
1.1.3 Form P11D(b) and Class 1A NICs
The P9D and P11D are completed at an employee-by-employee level. Where any of the expenses or benefits attract Class 1A NICs, the total, plus the corresponding NICs liability, must be declared via form P11D(b) by 07 July.
The Class 1A Contributions must be paid to HMRC’s Accounts Office by 19 July or the 22nd if making the payment by an approved electronic method.
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1.2 WHAT HAS CHANGED
1.2.1 P14s and the P35
From April 2013, most employers started reporting PAYE information in real time via the Full Payment Submission (FPS) and Employer Payment Submission (EPS).
If the employer has been reporting tax year information in real time, they must not send forms P14 or P35, as these will be rejected at HMRC.
1.2.2 Final Submission of the Year
At the end of the tax year, employers must submit their final FPS and / or EPS for the pay period as normal. The FPS should be submitted on or before the date that employees are paid and the EPS has to be submitted within the relevant ‘EPS Window’.
It is important to determine what the final submission of the year will be for the entire PAYE scheme, i.e. will it be the FPS or will it be the EPS? This is particularly relevant in the situation that an employer has one PAYE scheme with multiple payrolls and / or different pay frequencies, for example weekly and monthly:
• For some employers who have had no Statutory Payment reclaims to make or no NIL periods of activity, the final submission will be the Month 12 or Week 52 FPS
• However, for many employers, the final submission will be the EPS
Regardless of which, the final submission must contain the indicator that it is the last submission of the tax year. Employers need to be aware that if more than one payroll is processed under the PAYE scheme it is the final submission for that PAYE scheme that must contain the indicator.
Marking the ‘final submission’ indicator will prompt the payroll software to ask the ‘P35’ declaration and questions.
1.2.3 The Declaration and Questions
Selecting the indicator that this is the final submission of the tax year will bring up the questions and the declaration – note that these are available on both the FPS and the EPS.
Broadly, these are the same questions that payroll professionals will be familiar with, though the declaration and question regarding submission the completion and retention of the P14s, P38(A), P38(S) and P35 have been removed, as they are no longer valid under RTI.
Pre-RTI, the declaration and questions appeared on form P35 and employers had until 19 May to submit the form. Post-RTI, the final FPS or EPS needs to be submitted by 19 April, therefore, employers are advised that the responses need to be gathered in plenty of time. Employers and their agents may want to consider obtaining that information in advance.
The actual declaration and questions are detailed below:
Description Comments
Did you make any free of tax payments to an employee?
Indicate ‘Yes’ if you made any ‘free of tax’ payments to an employee. A ‘free of tax’ payment is a payment where the employer (rather than the employee) bears any tax due.
Otherwise indicate ‘No’. Did anyone else pay expenses or in any way
provide vouchers or benefits to any of your employees while they were employed by you during the year?
Indicate ‘Yes’ if someone other than you, paid expenses or provided benefits to any of your employees during the year as a result of the employee working for you. Otherwise indicate ‘No
Did anyone employed by a person or company outside the UK work for you in the UK for 30 days or more in a row?
Indicate ‘Yes’ if anyone employed by a person or company outside the UK worked for you in the UK for 30 days or more in a row and you did not include them on a RTI submission.
Otherwise indicate ‘No’. Have you paid any of an employee’s pay to
someone other than the employee, for example to a school?
Indicate ‘Yes’ if you paid any of an employee’s pay to someone other than the employee, for example to a school, and you did not include this pay on a RTI submission.
Otherwise indicate ‘No’. Completed forms P11D and P11D(b) are
due
Indicate ‘Yes’ if completed forms P11D and P11D(b) are due for the year.
Otherwise indicate ‘No’.
Are you a Service Company? Indicate ‘Yes’ if you are a Service Company and have operated the Intermediaries legislation (chapter 8 of part 2 of ITEPA, sometimes known as IR35)
Otherwise indicate ‘No’.
1.3 CORRECTIONS
1.3.1 Final Submission Indicator Omitted
Note that, where the final submission of the year is the FPS and the ‘final submission’ indicator has been omitted, the year must be ended via the submission of an EPS, even though this may have never been completed previously.
1.3.2 Corrections after the Final Submission
If the employer needs to correct any of the information on the final submission, a revised FPS must be sent as soon as possible, but before 20 April 2014. If the declarations and questions have been answered previously, there is no requirement for these to be answered again.
From 20 April, HMRC begin the process of finalising taxpayers’ tax, National Insurance and Student Loan position and assessing eligibility to Tax Credits and any FPS from 20 April onwards will not be taken into consideration.
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1.3.3 The Earlier Year Update
If the employer discovers any errors or omissions in the final FPS on or after 20 April 2014, these must be corrected by sending an Earlier Year Update (EYU).
The EYU can only be used for the tax years where the employer has operated using RTI submissions via the FPS and EPS. If the employer used the P35 and P14s to close a tax year, any amendments to these years must be made using a P14 amendment facility, remembering that a revised P35 also needs to be generated. The EYU will show the differences to be made to the relevant year-to-date figures for an employee. These could relate to pay information, tax, NICs, Student Loan deductions etc. For example, if the year-to-date tax for an employee was recorded incorrectly by £50 too little on the last FPS of the tax year, the EYU will show +£50 against this employee.
The FPS and the EYU report information to HMRC at an employee level, much the same as reporting on the P14 used to do. Depending on the information that is submitted, this may affect the position at an employer level in respect of their liability to make a payment to HMRC. For example, if SMP was overstated by £500 for an employee, this will be corrected on the employee’s record by the submission of the FPS or EYU, i.e. correcting the year-to-date taxable pay. However, it will need to be corrected at an employer level via a revised EPS, as the employer has reclaimed at least 92% of this value. The employer needs to consider:
• A revised EPS can be submitted at any time, as long as it is within 6 years of the end of the tax year
• However, in the above example, the employer will have reclaimed at least 92% of the SMP, which is incorrect and will have to be repaid
• If the filing of the correcting FPS / EYU is after 19 April, HMRC will consider this a late filing and may issue a penalty (note that employers have until 19 May 2014 for the 13/14 tax year, however, it will be 19 April from 14/15 onwards)
• If the correcting EPS results in an underpayment of the PAYE liability and this liability is not settled by 19 / 22 April, HMRC will consider this a late payment and may issue a penalty (as above, employers have until 19 May 2014 for the 13/14 tax year)
Employers are advised to contact their payroll software providers so that the functionality of the EYU in individual systems is understood before the submission is used on or after 20 April.
If the functionality does not exist in payroll software, the EYU can be sent via HMRC’s Basic Payroll Tools (BPT), regardless of whether this has been used previously in the tax year.
Pension Refunds
Negative YTD pension contributions may be allowed in the payroll system; however, the FPS will not allow the reporting of negative YTD pension values. Therefore, there is the issue where an employee goes into a pension scheme and contributions are deducted but are reimbursed in a following pay period, possibly in a different tax year, and result in a negative YTD balance. For example, maybe the employee Opts-Out of Auto-Enrolment in April (Month 01) but their first contributions were taken in the March monthly payroll (Month 12).
Employers need to consider that the FPS will report this period values but any YTD corrections have to be reported via the EYU.
1.3.4 More than one Final Submission?
It could be that the final submission actually turns out not to be the final submission for the PAYE scheme – for example, the Week 51 FPS is sent indicating that it is the final submission before the Week 52 FPS (and, indeed, before any EPS that may be due).
In this regard, HMRC have confirmed that it is possible to send the final submission indicator more than once and will overwrite the previous final submission. However, the very final submission must be made before 19 April.
1.4 PENALTIES
The penalty regime has been subject to review given the advent of reporting in real time. Further, there is a recognition that 2012/13 and 2013/14 have been regarded as years of transition from one reporting regime to another.
Therefore, the penalty regimes that apply in these years will differ from the new regime that will apply in for late filing of the FPS (from October 2014) and late payment (from April 2015) a time when all but micro employers should be reporting in real time.
1.4.1 2013/14
Late Returns
The underlying rule with RTI is that the Full Payment Submission (FPS) must be sent ‘on or before’ the time of payment. Corrections to the tax year can be made via the FPS up to, and including, 19 April following the end of the year. Any corrections after this date will have to be made via the Earlier Year Update (EYU).
The existing (pre-RTI) end-of-year penalty regime will continue to apply, meaning that everything must be in order for all employees by 19 May following the end of the previous tax year. This means:
• Employers have to submit their final FPS by 19 April following the end of the tax year. The FPS cannot be submitted after this date for the previous tax year
• Employers have to submit the EYU for the preceding tax year by 19 May
If the 19 May deadline is not adhered to, late filing penalties will accrue at £100 per 50 employees. After this date, HMRC will notify the employer that a penalty has been incurred and that it is increasing for each month of continued late submission. Further Penalty Notices will be issued in September, then January and May of the following year.
Late Payments
For 2013/14, HMRC will continue to use a risk-based approach to identify employers who are not complying with their payment obligations and might be liable to late payment penalties. Where such employers are identified, late payment penalties may be charged.
Remember that, broadly, the payment that must be made to the Accounts Office will be the totals of any FPSs that have been sent in less any recoveries that may apply as a result of submitting the EPS.
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1.4.2 2014/15
Late Returns
In 2013/14 and before, penalties only applied when the final return of the year was not submitted by 19 May.
From October 2014, late return penalties will apply monthly if the FPS is received late at HMRC. HMRC will determine whether it is received late by comparing the date of receipt to the Payment Date on the FPS. If the date of receipt is after the Payment Date, HMRC will determine this as late receipt.
Broadly, the late filing penalty regime will be applied per PAYE scheme and the size of the penalty varies in accordance with the number of employees in the scheme. There will be one unpenalised default allowed in each tax year and new employers will not be penalised if their first FPS is received within 30 days of making their first payment to an employee.
The result is that different penalties will apply depending on the size of the PAYE scheme and the number of defaults:
Number of Employees Monthly Late Filing Penalty per PAYE Scheme 1 to 9 £100 10 to 49 £200 50 to 249 £300 250 or over £400 Late Payments
From April 2015, the late payment regime will broadly work along the same lines as the requirement for employers to submit in real time - the previous penalty regime only attracted penalties for the total late payment in the tax year.
Penalties will be charged on each PAYE scheme and a default penalty will be charged for failing to make a monthly or quarterly payment on time. The amount of the penalty for late monthly or quarterly PAYE payments will depend on the value of the late payment and the number of times in the tax year that it is paid late.
The penalty charging regime will apply as follows:
No. of Defaults in the Tax Year
Penalty Percentage
Amounts to which the Percentage Applies
1 to 3 1%
4 to 6 2%
7 to 9 3%
10 or more 4%
The total amount that is late in the relevant tax Month or Quarter (ignoring
1.5 DEADLINES
The table below summarises the deadlines that apply:
Deadline Task
Final
submission for PAYE scheme
Must be marked with the ‘final submission’ indicator and the declaration and questions must be completed
19 April • Any correction to the FPS must be sent for the preceding tax year (for 2013/14, the EYU can be used to submit corrections, as long as these are submitted on or before 19 May 2014)
• ‘Final submission’ indicator must have been set via either the FPS or EPS
31 May Forms P60 must be given to employees who were employed at 05 April of the previous tax year
06 July • Forms P9D / P11D and P11D(b) must be received at HMRC
• Form P9D and P11D must be given to all employees, where relevant, who were employed at 05 April of the previous tax year
19 July Class 1A postal payments to be received at HMRC
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SECTION 2:
TIPS FOR A SUCCESSFUL YEAR-END
Identify your final submission for the PAYE scheme:o Consider whether this will be the FPS or EPS and consider split PAYE
schemes – i.e. where some processing is performed by one location and the remainder in another location
o The final submission has to be sent by 19 April. FPSs after this time will not
apply to the correct tax year
o For 2013/14 only, corrections to the FPS can be made via the EYU up to 19
May 2014 without penalty
o Corrections needed to employer recoveries can be made up to 6 years later,
however, must be submitted in the EPS specification format that is relevant to the year that needs adjustment – i.e. a correcting EPS for 2013/14 sent in 2016/17 tax year must be in the 2013/14 format
o If the final submission of the year happens to be in Month 11, for example, as
there is no activity in Month 12, Month 11 can contain the final submission indicators, however, employers must remember to send a NIL activity EPS. Failure to do this will result in a possible penalty situation where HMRC recognise a failure to file a submission that there were expecting
Note that the indicator has to be ticked denoting that it is the final submission of the tax year NOT the final submission because the PAYE scheme has ceased Note that the EYU has to be used to correct YTD information that has been submitted in a previous tax year. This can only be used where the employer was submitting in real time for that tax year. Also note that the EYU must be used to report YTD negative pension values, if applicable, as these will not be reported via the FPS Consider the declaration and questions:o The deadline for these is earlier, therefore, consider gathering the information
earlier
Retain documentary evidence that the submission was within the timescales outlined above. This should be provided by payroll software Complete other year-end processing:o P60s (plus P61 or P62 for tax withheld as a result of a trade dispute that
continues over tax year-end, if applicable)
