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PAYE: Withdrawal of the earlier year update facility

Caroline Harwood, Partner, Head of Share Schemes and Employment Tax
11/09/2019
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Earlier this year, HMRC formally announced their proposal to extend the use of Real Time Information (RTI) Full Payment Submissions (FPS) to report any late amendments to payroll data covering any errors identified after the 19 April deadline for the prior tax year. This reporting system was introduced on a trial basis for the tax year 2018/19. 

For the tax years ending 5 April 2018 and before, employers who had identified payroll errors beyond the 19 April deadline for the preceding year would have needed to submit an Earlier Year Update (EYU) to make any necessary corrections. Employers are still able to make an EYU for the tax year 2018/19.    

From April 2020 onwards, HMRC now plans to withdraw the Earlier Year Update altogether, and proceed with rolling out the RTI FPS system as the sole method available for employers to make late payroll corrections in the future. 

Why is this being done?

This should represent a positive change from an employer perspective, as employers will now be able to overwrite incorrect payroll data in real time, and any amendments will be reproduced on HMRC systems rather than placing an onus on employers to create reports showing how amended data differs from what has already been reported. HMRC views the change as a simplification of the payroll corrections process, and it should create a more efficient alignment between their systems and up-to-date employer data on pay and deductions. 

What do I need to do?

All employers should check whether their payroll software (or check with their applicable payroll provider) supports the functionality to undertake corrections via the FPS route.

If you are using HMRC software, they have assured employers that their Basic PAYE Tools software will be amended in April 2020 to support the transition from EYU to FPS.

 

Contact us

Caroline Harwood
Caroline Harwood
Partner, Head of Share Plans and Employment Tax
London