PAYE72053 | PAYE72053 PAYE operation: payments for PAYE purposes: Advance of salary – Real Time Information (RTI) reporting

Advance of salary — Real Time Information (RTI) reporting

Salary advances are arrangements allowing employees access to some of their salary before their normal payday. Arrangements to provide a salary advance can be made through an employer or a third party and are commonly known as salary advance schemes. Where the advance is made by a third party acting on the employer’s behalf the reporting obligation remains with the employer.

Prior to 6 April 2024 employers were required to submit an additional Full Payment Submission (FPS) to record all salary advance payments.

Amendments to legislation have been made to ease the administrative burdens for both employers and HMRC and apply to certain salary advances. Where the amended legislation applies, it requires employers to delay reporting a salary advance to HMRC’s Real Time Information (RTI) system until the payment of the remainder of the salary instalment. This means only one RTI report will now be expected for each pay period.

The amendments apply where certain conditions relating to the salary advance are met. These conditions are:

1. the employee’s salary is ordinarily paid at regular intervals of between one week and one month and the employer pays part of the salary in advance,

2. the salary advance reasonably represents work undertaken or obligations performed by the employee in accordance with the employee’s contract with the employer in respect of which no other relevant payment has been made, and

3. the employer makes a reduced regular relevant payment to the employee (reduced by reference to advance payments made to the employee) at the regular payday that follows the making of the advance payment.

Other types of advance payments and loans to employees are covered by existing HMRC rules and guidance and are therefore not within the scope of this guidance.