6.1 Real Time Information (RTI) Submissions

6.1 Real Time Information (RTI) Submissions

1. Statutory Framework and Objectives of RTI

Under the Income Tax (PAYE) Regulations 2003 (as amended), all UK employers operate payroll under the Real Time Information (RTI) reporting system. Introduced in April 2013, RTI replaced the former end-of-year reporting regime (legacy Forms P35 and P14) with a system that collects employee pay and deduction data in real time directly from payroll software.

The primary objectives of RTI are:

• Accuracy of Tax Calculations: Enabling HM Revenue & Customs (HMRC) to adjust tax codes during the tax year rather than relying on annual post-year reconciliations.
• Integration with Universal Credit: Providing the Department for Work and Pensions (DWP) with real-time monthly earnings data to calculate Universal Credit awards accurately.
• Reduction of Tax Evasion: Preventing illegal off-the-books payroll practices and ensuring timely payment of Pay As You Earn (PAYE) income tax and National Insurance Contributions (NICs).

$\text{Net Monthly Remittance to HMRC} = \text{PAYE Tax} + \text{Employee NIC} + \text{Employer NIC} - \text{Statutory Pay Recoveries} - \text{Employment Allowance}$

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2. Full Payment Submission (FPS): Rules, Timing, and Data Fields

A. The Timing Rule

The fundamental statutory rule of RTI is that a Full Payment Submission (FPS) must be submitted electronically to HMRC on or before the date employees are paid (the payday).

Exam Key Concept: Even if an employer operates a monthly payroll and pays employees on the last Friday of the month, the FPS must reach HMRC on or before that specific Friday. Submitting the FPS after the payday constitutes a late filing default.

B. Statutory Exceptions to the "On or Before" Rule

Narrow statutory exceptions allow an FPS to be submitted after payday without incurring a late filing penalty, including:

• Payments made on non-banking days (bank holidays or weekends) where employees are paid early or late due to banking operational limits.
• Micro-employers (fewer than 10 employees) operating flexible payrolls under specific temporary HMRC concessions.
• Unforeseen technological failures where HMRC's online systems are demonstrably offline.

C. Key Mandatory Data Fields in an FPS

Every FPS transmitted to HMRC contains granular individual employee records, including:

• Employee Identification: Full legal name, residential address, date of birth, gender, and National Insurance Number (NINO).
• RTI Payroll Details: Unique Payroll ID (RTI Pay ID), tax code, and tax code basis (Cumulative or Week 1 / Month 1).
• Gross Pay & Deductions: Gross taxable pay in the pay period, year-to-date gross pay, PAYE tax deducted in the period, and year-to-date PAYE tax.
• National Insurance Breakdown: Employee primary Class 1 NICs, Employer secondary Class 1 NICs, NIC category letter (e.g. Letter A for standard employees), and earnings thresholds breakdown (LEL, PT, ST, UEL).
• Statutory Payments: Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), and Statutory Adoption Pay (SAP).
• Net Pay: Total cash paid to the employee for the pay period.

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3. Employer Payment Summary (EPS): Scope, Timing, and Uses

While the FPS details individual employee earnings and deductions on payday, the Employer Payment Summary (EPS) adjusts the employer's overall financial liability to HMRC for the tax month.

A. Submission Timing

The EPS must be submitted electronically to HMRC by the 19th of the month following the end of the tax month to which it relates.

Note: The UK tax month runs from the 6th of one calendar month to the 5th of the following calendar month. For example, Tax Month 1 runs from 6 April to 5 May. The EPS for Tax Month 1 must be submitted by 19 May.

Tax Month 1: 6 April ─────────► 5 May
FPS Submission:  Submitted on or before each Payday
EPS Deadline:    Submitted by 19 May (19th of following tax month)
PAYE/NIC Due:    22 May (Electronic payment deadline)

B. Core Uses of the EPS

An EPS is not required every month unless specific adjustment criteria apply. The EPS is used to:

1. Claim Recovery of Statutory Payments: Employers can recover statutory payments made to staff (SMP, SPP, SAP, ShPP).
   • Standard Recovery Rate: 92% of the statutory pay paid to employees.
   • Small Employers' Relief (SER): Employers whose total Class 1 NICs (employee primary + employer secondary) were £45,000 or less in the qualifying tax year can recover 100% of statutory pay plus an additional 3% compensation (total 103%). Note that SSP is never recoverable — only the family-related statutory payments are.
2. Claim the Employment Allowance: Eligible employers claim the annual Employment Allowance (£10,500 for 2025/26) via the EPS, offsetting it against Employer Secondary Class 1 NIC liabilities. The allowance must be claimed — it is not applied automatically — and a company whose only employee is a single director cannot claim it.
3. Report Apprenticeship Levy: Employers with an annual pay bill exceeding £3,000,000 report their 0.5% levy liability via the EPS (applying the £15,000 annual levy allowance).
4. Report Zero Payments in a Tax Month: If an employer pays no employees during a tax month, an EPS must be submitted indicating "No payments made in this tax month". Failure to submit an EPS causes HMRC's system to generate estimated demand notices (specified charges).

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4. Final RTI Submissions for the Tax Year

At the end of the tax year (which ends on 5 April), employers must complete final end-of-year reporting procedures:

• Final FPS / EPS Deadline: The final FPS or EPS for the tax year must be submitted to HMRC by 19 April.
• Final Submission Indicator: The employer must check the box marked "Final submission for this tax year" on the final FPS or EPS.
• Employee Year-End Statements (Form P60): By 31 May following the end of the tax year, employers must issue a Form P60 (Certificate of Pay, Tax, and National Insurance) to every employee who was in their employment on 5 April.

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5. HMRC Late RTI Filing Penalties

HMRC operates an automated penalty regime for late RTI submissions (FPS submitted after payday or EPS submitted after the 19th). Penalties are assessed monthly based on the size of the employer's PAYE scheme (the number of active employees).

Important Penalty Rules:

1. First Late FPS Concession: HMRC generally waives the penalty for the first late FPS in a tax year (except for schemes with 1 employee where HMRC monitors compliance closely).
2. Subsequent Late Filings: Every subsequent late FPS in the tax year triggers an automatic penalty based on the table above.
3. Extended Default Penalty: If an RTI submission is more than 3 months late, HMRC may charge an additional penalty equal to 5% of the tax and NIC that should have been reported.

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6. Late Payment Penalties and Interest on PAYE/NIC Liabilities

Employers must remit net PAYE tax and NIC liabilities to HMRC by statutory payment deadlines:

• Electronic Payment Deadline: 22nd of the month following the end of the tax month (e.g. 22 May for the tax month ending 5 May).
• Cheque Payment Deadline: 19th of the month following the end of the tax month.

A. Late Payment Penalty Scale

Late payment penalties apply to defaults occurring within a single tax year:

B. Extended Non-Payment Penalties & Interest

• 6 Months Overdue: An additional penalty of 5% of the unpaid amount applies to payments remaining unpaid after 6 months.
• 12 Months Overdue: A further 5% penalty applies to balances remaining unpaid after 12 months.
• Daily Late Payment Interest: HMRC charges daily interest on all overdue PAYE/NIC balances from the statutory due date (22nd) until full payment is received.

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7. Worked Calculation Example: EPS Statutory Pay Recovery

Scenario

Bright Sparks Ltd operates a monthly payroll for 15 employees (Small Employer's Relief applies as total prior-year Class 1 NICs were £28,000). For the tax month ending 5 May 2026, the FPS totals show:

• PAYE Tax Deducted: £6,200
• Employee Class 1 NICs: £2,800
• Employer Class 1 NICs: £3,400
• Statutory Maternity Pay (SMP) Paid to Employee: £1,500

Bright Sparks Ltd submits an EPS on 12 May 2026 to claim Small Employers' Relief (103% recovery).

Step-by-Step Calculation

1. Gross PAYE / NIC Liability before adjustments: $\text{Gross Liability} = £6,200 + £2,800 + £3,400 = £12,400$

2. Small Employers' Relief Recovery (103% of SMP): $\text{SMP Recovery} = £1,500 \times 103\% = £1,545$ (Calculated as £1,380 basic 92% recovery plus £165 3% SER compensation).

3. Net Remittance Due to HMRC by 22 May 2026: $\text{Net Remittance} = £12,400 - £1,545 = \mathbf{£10,855}$

If Bright Sparks Ltd fails to pay the £10,855 by 22 May and this is their 3rd late payment in the tax year, HMRC will charge a 1% late payment penalty (£108.55) plus daily interest.

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8. Exam Traps & Common Pitfalls

Exam Trap 1: Confusing FPS and EPS Deadlines Candidates frequently misquote filing deadlines! Remember: FPS is due ON OR BEFORE PAYDAY (which varies by employer). EPS is due by the 19th OF THE FOLLOWING TAX MONTH (a fixed statutory calendar date).

Exam Trap 2: Incorrect Statutory Pay Recovery Percentages Do not apply 100% recovery! Standard employers recover 92% of statutory maternity/paternity pay. Only qualifying small employers (Class 1 NICs ≤ £45,000) recover 103% under Small Employers' Relief.