HMRC amends secondary legislation on salary advances and RTI reporting requirements
23 November 2022
Within the November 2022 Agent Update, HM Revenue and Customs (HMRC) has addressed how salary advance payments are to be treated going forward.
Some employers pay employees salary advances, to allow them to access a portion of the salary they’ve earned prior to their standard pay date. There are also circumstances where employers arrange to make these payments through a third party, who will often charge an associated fee for the service. This may be happening more frequently at present, given the current cost-of-living crisis.
Current legislation stipulates that these advance payments must be treated as a payment on account of earnings, which subsequently means employers must submit extra real time information (RTI) reports to record them. However, salary advances can be paid regularly, meaning this would create substantial administrative work for not just employers, but also for HMRC. The additional RTI reports could also have unintended impacts on universal credit.
Secondary legislation is due to be amended, to allow salary advances to be reported on or before an employee’s contractual pay day, so they will only need to be included for RTI purposes once. Employers who are currently adhering to this rule may continue to do so until the legislation is implemented.
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