Festive Payroll Tips: Avoid HMRC Reporting Pitfalls This December

As the festive season approaches, many UK businesses choose to pay staff earlier than usual in December. While this is a thoughtful gesture, it can create issues with HMRC reporting, potentially affecting employees’ income-based benefits. Here’s how to navigate this holiday payroll challenge smoothly.

Understanding HMRC’s RTI Easement

The UK tax authority allows businesses to report the usual contractual payment date rather than the early payment date when submitting their Full Payment Submission (FPS) through Real-Time Information (RTI). This ensures employees’ benefits, such as Universal Credit, remain unaffected.

Example

If your business usually pays employees on 30 December but decides to pay them on 20 December for the festive period, you must still report 30 December as the payment date in your FPS.

Best Practices for Compliance

1. Plan Payroll Early: Confirm payroll deadlines with your payroll provider well in advance.
2. Update FPS Records Accurately: Ensure the FPS reflects the contractual pay date, not the early payment date.
3. Communicate with Staff: Inform employees about the early payment and its implications for benefits.
4. Double-Check Before Submission: Cross-check payroll records to avoid costly errors.

Why This Matters

Incorrect payroll reporting can:

• Affect employees’ benefits and tax credits.
• Trigger compliance reviews from HMRC.
• Lead to fines for late or incorrect submissions.