NIM08741 | Earnings Periods: Advance payments: Salary Advance Payments

Regulations 1(2) and 7(3A) of the Social Security (Contributions) Regulations 2001 (SSCR 2001) (SI 2001 No 1004)

Regulation 2 of The Social Security (Contributions) (Amendment No. 3) Regulations 2024 inserted a definition of advance payment into regulation 1(2) but only for the purposes of regulation 7 and paragraph 21AE of Schedule 4.

The amendments are intended to simplify the reporting process for employers whose employees receive salary advances, either:

• directly from the employer or

• through a third party.

To ease the administrative burden, employers will delay reporting a salary advance to HMRC’s Real Time Information (RTI) system until the payment of the remainder of that salary instalment at the regular interval.

A payment of earnings is a salary advance payment (for the purposes of regulation 7 and paragraph 21AE of Schedule 4) where:

• the payment of earnings is not made at a regular interval; and

• the payment is for an amount that would otherwise be included in the payment at the next regular interval that follows the making of the payment of earnings; and

• the payment does not exceed the amount that, at the time that the payment of earnings is made, reasonably represents completed service in respect of which no other payment of earnings has been made.

Advances must reasonably represent work undertaken or obligations performed by the employee in accordance with the employee’s contract with the employer in respect of which no other payment of earnings has been made.

Other payments made in advance of the regular payment interval to employees or loans are covered by existing HMRC rules and guidance. Such payments fall outside of scope of the definition of a salary advance and are not covered by new 21AE.

Where the advance is made before the tax year ends and the normal payday falls in the next tax year the provisions of regulation 7(3) are disapplied by regulation 7(3A), see NIM08721 for further information.