A Full Payment Submission (FPS) informs HMRC of payments to employees and includes deductions that have been made. This should be sent to HMRC from your payroll software on or before each payday. The end of year deadline to send an FPS submission is the 19th April. If any amendments need to be made to an employee’s totals after this date then you are required to submit this information in the form of an Earlier Year Update (EYU).
EYUs are used to correct information submitted in the previous tax year. An EYU simply reports the adjustment made to an employee’s totals in the payroll, as opposed to reporting re-stated year to date totals for the tax year to HMRC. EYUs for each tax year can be prepared multiple times as required, without limit, and will be accepted by HMRC for a period of 6 years.
Unfortunately for employers, not all payroll software packages have the ability to create EYU files and therefore cannot easily make corrections where needed after the tax year. In addition to using their existing payroll software, many employers double their workload and use HMRC Basic PAYE Tools to create and submit an EYU. HMRC have advised that employers should only use Basic PAYE Tools to complete and submit an EYU if their payroll software does not have this facility.
It is important to note that good payroll software packages can seamlessly create an EYU and facilitate the submission to HMRC. Compared with using two separate payroll systems, it is advisable to look for payroll software that can do this for you, for example BrightPay.
With BrightPay, if a mistake is made in the payroll the user can seamlessly roll back the payroll for employees on an individual basis. Once the correction has been made and the payslip has been finalised, BrightPay will enable users to create the EYU at the click of a button. Simply select the employees for whom you have made an adjustment and submit the EYU to HMRC.
Along with easy to use RTI functionality, BrightPay also allows users to automate their auto enrolment duties and has both CIS and P11D features. Book a demo today to see just how easy it is to use BrightPay.
HMRC has provided a soft landing for late filing penalties for full payment submissions (FPS) under RTI since 2014/15, but that was due to end on 5 April 2016. Now, seven weeks into the 2016/17 tax year, HMRC has announced that the late filing penalty soft landing will be extended to April 2017. The fully automatic late filing penalty regime for RTI was supposed to come into force from 6th October 2014 for employers with 50 or more employees, and from 6th March 2015 for all other employers. In fact, the automatic function was disconnected, and HMRC decided to risk assess the issue of all RTI late filing penalties.
HMRC will continue with this risk-based approach until at least 5th April 2017. This means that only employers who have persistently filed their FPS late for several months will be issued with a penalty – which can be appealed.
During the 2016-17 tax year, HMRC has decided to continue their approach of the 3 day easement and the risk-based approach to charging penalties. Employers will not incur penalties for delays up to three days in filing PAYE information to HMRC. This is due to a review of this approach that was implemented in the 2015-16 tax year which showed a large reduction in returns being filed late.
Employers are required to file their PAYE information to HMRC on or before each payment date, which is the statutory filing date, unless the circumstances set out in the 'sending an FPS after payday guidance' are met. The three day easement is not an extension to the statutory filing date. No late filing penalties will be charged for late filing up to three days after the statutory filing date. However, employers who consistently are filing their returns for up to the three days after the statutory filing date will be monitored by HMRC and may be issued with a penalty.
HMRC will continue to monitor the situation and will review their approach if necessary for the tax year 2017-18, focusing on employers who are constantly filing late and failing to meet the statutory deadlines.
Penalties from HMRC will be issued if any late filing of a Full Payment Submission (FPS) from 6th April 2016 onwards.
Currently there is a 3 day relaxation for filing a late Full Payment Submission which is detailed per the HMRC website GOV.UK https://www.gov.uk/guidance/what-happens-if-you-dont-report-payroll-information-on-time
"HMRC won’t charge a penalty if:
• your FPS is late but all reported payments on the FPS are within 3 days of your employees’ payday (this applies from 6 March 2015 to 5 April 2016)"
The other circumstances where HMRC will not issue a penalty for late submission of an FPS are when:
• you’re a new employer and you sent your first FPS within 30 days of paying an employee
• it’s your first failure in the tax year to send a report on time (this doesn’t apply to employers who register with HMRC as an annual scheme or have fewer than 50 employees for the tax year 2014 to 2015)
The Error 1046 will state: The supplied user credentials failed validation for the requested service.
BrightPay does not check your User/Sender ID and Password as we don’t know what they should be. BrightPay sends this information to the Government Gateway. If you get this Error 1046 it means that the Government Gateway has rejected the submission.
Is the User/Sender ID and Password correct?
Ensure that you can access the HMRC website at http://www.gateway.gov.uk/ using your User ID and Password that you entered in BrightPay. If you are unable to log in you can call the HMRC Online Services Helpdesk on 0300 200 3600.
Is your password greater than 12 digits?
When you are entering your password into the HMRC website, only the first 12 digits will be accepted. However when entering your password into the software it recognises all digits and deems anything after the first 12 as being incorrect causing the Error 1046. If your password is longer than 12 digits, only use the first 12 in BrightPay.
Is your Government Gateway activated?
Once you have registered to use HMRC’s Government Gateway your new Activation Code will be sent via post within 7 days. Once received you can log into HMRC online using your User ID and Password and activate the service. You must do this within 28 days of the date shown on the Activation Code letter.
Double check the information you entered in BrightPay!
Ensure that your PAYE reference number, Accounts office reference and HMRC office name are entered correctly and match the details that HMRC have for you. Check the references don’t have 'Z' instead of '2' or '0' in place of 'O'. Ensure your email address is correct and matches the one you have registered with HMRC.
Hmrc have recently provided employers with information about late/non filing PAYE penalties, inaccurate reports and how to avoid penalties in the future.
Penalties are applied when one or more of the following occur:
- The full payment submission (FPS) was late
- The expected number of FPSs are not sent for any given period
- An EPS (Employer Payment Summary) is not sent when you did not pay any employees in any given pay period
HMRC will not charge a penalty if:
- The FPS is late but all reported payments on the FPS are within 3 days of the employee’s payday
- A new employer sends their first FPS within 30 days of paying an employee
- It is the first failure in the tax year to send a report on time (this does not apply to employers who register with HMRC as an annual scheme or have fewer than 50 employees for the tax year 2014 to 2015)
HOW MUCH WILL BE CHARGED FOR LATE FILING?
Number of employees - Monthly penalty
1 to 9 - £100
10 to 49 - £200
50 to 249 - £300
250 or more - £400
If an employer is over 3 months late they wil charged and additional penalty of 5% of the tax and NI Insurance that they should have reported.
Also be aware that if there is more than one PAYE scheme penalties can be charged on each!
HMRC has now issued the first in-year penalties notices to employers with fewer than 50 employees who missed the deadline for sending PAYE information to HMRC. Please see the News story on GOV.UK at https://www.gov.uk/government/news/pay-as-you-earn-paye-late-filing-penalties for further details.
Correcting Payroll Errors using Full Payment Submission (FPS)
If a mistake has been made with an employee’s pay or deductions it can corrected by using your next Full Payment Submission (FPS) to update your year-to-date figures.
Correcting Payroll Errors using an Additional Full Payment Submission (FPS)
An additional FPS can also be sent to correct year-to-date figures providing it is sent before your next FPS is due. In the case of an additional FPS the same pay date should be used.
If an employee has been underpaid you can either send an additional FPS, on or before you pay your employee the additional amount or by the 19th of the tax month after you sent your original FPS. HMRC will include the correction in that month’s PAYE bill.
Correcting errors in an employee’s National Insurance deductions
Both FPS’s and additional FPS’s can be used to correct mistakes to National Insurance deductions.
If an employee has underpaid their national insurance in a particular month, only the equivalent of their following month’s national insurance liability can be taken from them the following month. The remainder must be recovered in another month. Pay any underpayment to HMRC straight away.
Example: Your employee underpaid by €80 in January. In February the employee’s national insurance is €60. This means you can only recover up to €60 towards their underpayment that month. The remainder will need to be recovered the following month.
If the underpayment was in a previous tax year
An Earlier Year Update (EYU) should be sent to HMRC stating the difference between what you originally deducted and the correct amount. The EYU will inform HMRC if you’ve deducted or repaid the difference to the employee. Once more if you have deducted too little you can’t recover more than the National Insurance due that month.
Correcting an employee’s student loan repayments
Both FPS’s and additional FPS’s can be used to correct mistakes once the difference has been repaid or deducted to the employee. Once more if you have deducted too little you can’t recover more than the student loan deductions due that month.
If the mistake was in a previous tax year
If you have deducted too little you do not need to do anything. The employee can contact the Student Loans Company to see how it affects them. If you have deducted too much refund your employee and you can correct your year-to-date figures using an FPS on or before 19th April otherwise use an EYU.
Under RTI employers running payroll are required to report their employees’ pay and deductions to HMRC in regular Full Payment Submissions (FPS) through the year. A final end of year FPS (or EPS) must be submitted by 19 April.
Employers will no longer be required to answer extra questions on the payroll submissions they make to HMRC at the end of the tax year.
The seven extra questions, which are only included on the final FPS of the year, were inherited from the old P35 form, which had a submission deadline of 19 May. This gave employers and agents much more time to ascertain the correct answers to the questions, such as whether any special payments have been received in the year from third parties.
Removing the requirement to submit this information at year end will significantly reduce burdens on employers but will most definitely reduce burdens on agents and bureaux, and make a busy time of the year just a little less frantic by removing the mandatory need for the employer (client) to provide confirmation to the answers to seven questions.
The change is expected to take effect from 6 March 2015, avoiding the need to complete the checklist for the 2014/15 tax year.
From 6 March 2015 HMRC will accept a final FPS or EPS for 2014/15 and 2015/16 with or without a completed checklist, but employers should still report the Final Submission for Year indicator.
In April of 2014 the UK Government introduced the Employment Allowance Scheme. This scheme offers businesses and charities a reduction of up to £2000 (max for tax year 14/15) in the amount of employer Class 1 National Insurance contributions (NICS) they have to pay every year from 6th April 2014.
Once employers process their first month’s payroll in April they are required to send an EPS (employment payment summary) to say that you as an employer are going to claim the employment allowance for 14/15. A lot of companies seem to be allowing for the employment allowance scheme in calculating the NI bill for HMRC but have not sent through their EPS which informs the HMRC that the company is taking advantage of the Employment Allowance scheme.
HMRC have announced that they will now issue generic notifications (otherwise known as GNS messages) to employers who may have failed to claim the Employment Allowance.
The intention behind these notifications is to encourage PAYE schemes to check eligibility and to claim their Employment Allowance. HMRC explain that the new notification may be sent to any PAYE scheme which has not so far submitted an Employment Summary in 14/15. HMRC anticipate that these notifications will not be issued before 25th September.