Reporting payroll information to HMRC

What to report

As an employer, you are required to report details of your entire payroll via a ‘Full Payment Summary’ (FPS) each time your employees are paid. This means that if you pay weekly you will make 52 submissions to HM Revenue & Customs, and if you pay monthly you will make 12. As well as the FPS, you will also need to send an ‘Employer Payment Summary’ (EPS) to apply for any reductions on what the FPS shows as owing to HMRC.

Full Payment Summary

Despite being described as a ‘payment summary’, the FPS records all payroll elements for all staff including non-financial data. Each FPS submission will therefore cover what has been paid by way of salary, bonus, commission etc; what has been deducted for PAYE, pension, student loans etc; as well as starters, leavers and changes to existing employee details such as a PAYE coding notice change or a new address.

Your payroll software will prepare the FPS based on the data you input and format it correctly for electronic submission to HMRC. The payroll software will be linked to the company PAYE record using its unique login details and provide HMRC with a real time view of the business. Each FPS submission must be made no later than your employees’ pay day and late submissions will usually attract a penalty.

Employee Payment Summary

Unlike the FPS, the EPS may not always be required and / or may not need to be filed every month. For small businesses with very simple affairs, an EPS may not be applicable but for businesses with more complex needs, most months will require an EPS to be filed.

An EPS is required where at least one of the following is true:

  • The business needs to reclaim a statutory payment such as maternity or adoption leave
  • The business is making an annual claim for Employment Allowance
  • The business needs to reclaim CIS deductions
  • The business is large enough to owe the Apprenticeship Levy (payrolls in excess of £3M annually)

For many companies, the first bullet point above is relevant in most months and therefore an EPS is often required. As with the FPS, your payroll software will prepare a correctly formatted EPS ready for submission to HMRC and, as with the FPS, late submission will likely generate a penalty with HMRC.

Why report?

Since the introduction of ‘Real-Time Information’ (RTI) in 2013, payroll data submitted to HMRC now provides both employers and employees with a much more up to date online record of their tax affairs. If submissions are made on time, by the 10th of the following month it is possible to log in to the HMRC website and see a fully up to date view of the information, including the cumulative position for the current tax year, and the outstanding amounts due to HMRC and the date by which they must be paid.

This is useful to both employers and employees in multiple ways and also allows HMRC to ensure ongoing compliance and identify tax issues as they arise.

RTI was the first major step in the Making Tax Digital (MTD) revolution and has been a highly successful test case for the last decade. The advantages that RTI brings will also apply to MTD for other taxes such as VAT and Corporation Tax once they become mandatory over the next few years.