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The benefits of HMRC’s salary advance reporting changes
18 October 2023

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 are:

• 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.

The proposed changes will also ease the administrative burden on employers. They will no longer have to submit additional RTI reports for salary advances. This will ultimately save time and resources.

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.

Limitations

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.

They promise to reduce administrative burdens, cut costs, and minimise errors, thereby making the process more efficient and effective. The consultation process is due to close on 9 October 2023, at which point more information should be released by HMRC.

If you would like more information and advice about how the proposed changes impact your business, please reach out to us today.