Under PAYE Real Time Information (RTI) payments of salary should be reported on or before contractural pay is due an employee*. Under the rules for IR35 companies are required to report a deemed payment of salary by the 5th April. Many IR35 companies are unable to calculate the deemed payment by that date, and so HMRC allows a late reporting concession.

HMRC's concession

Reporting arrangements for a Personal Service Company (PSC) within IR35:

  • Payments of salary made during the year should be reported on a Full Payment Submission (FPS) on or before the time of payment.
  • If no payment of salary is made in the month, then the PSC should submit an Employer Payment Summary (EPS) so that HMRC is aware not to expect an FPS or any payments that month.
  • On the last FPS or EPS during the tax year the PSC should declare that it is their final return of the year and answer the questions currently found on the P35.
  • The final FPS will include a specific question to indicate that this is a Service Company and has operated the Intermediaries legislation otherwise known as 'IR35'.
  • Employers who have operated IR35 should answer this question positively which will then alert HMRC that the scheme falls into the special arrangements for IR35.

Payment arrangements:

  • Payments of deductions to HMRC should be made on the same basis as they are at the moment - quarterly or monthly dependent on size of business by the 19th or 22nd of the month.
  • The provisional calculation of the deemed payment for PSCs should be reported on an FPS 'on or before' 5 April.
  • As is currently the case, HMRC would expect any outstanding deductions on the deemed payment that could not be calculated before 19 April to be paid by the following 31 January.  Interest will apply, but penalties for late payment will not be charged.
  • Where a provisional payment of tax and National Insurance contributions has been made because it has not been possible to accurately calculate the deemed payment and deductions by 19 April, then any adjustments should be reported via an Earlier Year Update (EYU) submitted electronically to HMRC before the following 31 January.  Late filing penalties will not be charged.

Our comment - check your software

Some payroll software does not allow Earlier Year Updates.

* Up to April 2016 HMRC also provided concessions with regard to RTI filing deadlines for small and micro employers, see RTI: micro employers.

 

 

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