HMRC has reiterated that employers should continue to report contractual pay dates in their full payment submission for December if they pay employees early, rather than actual payday, to avoid complications for staff receiving universal credit.
In its latest Employer Bulletin (October 2021), HMRC said it remained important for employers to follow its guidance on sending full payment submissions (FPS) in December. This means the FPS should report the contractual payday date and be submitted on or before employees’ actual payday, if salaries and wages are paid early in advance of Christmas.
HMRC says this will help to avoid recipients of universal credit (UC) from being treated as receiving two earnings payments in one monthly UC assessment window and none the next, which has implications for the amount of UC they receive and their work allowance.
The reminder came following legislation being introduced in November 2020 which obliges the Department for Work and Pensions (DWP) to reallocate a second monthly earnings payment to another UC assessment window, protecting claimants’ UC work allowance and cashflow.
In the Employer Bulletin, HMRC states that the legislation, which followed a Court of Appeal judgement, affected a “small minority of claimants in very specific circumstances”, (ie, when a calendar monthly pay date and the last day of their UC assessment period are close together).
Individuals in this circumstance have been able to request a reallocation of earnings since the introduction of the Universal Credit (Earned Income) Amendment Regulations 2020. A new automatic process introduced in August 2021, means that over the Christmas period if they receive two earnings payments DWP should automatically identify them and move the second payment into the next assessment period.
For employees being paid weekly, fortnightly or four-weekly, HMRC highlights that the situation is different, stating: “People paid at these frequencies will always have occasions where more than one set of earnings will be taken into account in a monthly assessment period. Moving a payment in these cases would not help to restore a regular payment pattern, it would simply move the same issue to a different assessment period.”
ICAEW Know-How from the Tax Faculty
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.