HMRC have reported that around 1.4m employers are now reporting under real-time information (RTI).

Large employers with 5,000 or more on the payroll are joining RTI over the summer. A few small employers, particularly those with complex payrolls, have until April 2014 to join, but they have been contacted by the Revenue.

Although RTI is being hailed by HMRC as a big success, there are a number of operational issues on both sides to be resolved: for example, statutory maternity pay (SMP) recovery.

A frequent query concerns discrepancies between what the taxman’s Debt Management and Banking (DMB) expects to be paid in PAYE and National Insurance (NI) and the actual amount the employer has paid over. There are several possible causes, but one of the most likely is the recovery of SMP from the payment to be made.

Before RTI, HMRC had no indication of the true amount due to be paid to DMB each month. The department suspected that employers withheld large amounts of tax due until later in the tax year, as a result of the payment of annual bonuses, but it was difficult to prove.

However, the Treasury estimated that £3bn remained unpaid at any time in the tax year. The Revenue can now anticipate the amount due via the full payment submission (FPS).

Although the amounts of SMP paid to employees are reported to HMRC on the FPS submitted with each payroll run, the RTI system is unable to calculate the amount of SMP recovery. Consequently, it cannot adjust the amount of NI that DMB expects to be paid over.

To claim the recovery, an employer must send an employer payment summary (EPS) to the taxman before the 19th of the month following the tax month. This must be done, even if the employer pays electronically on the 22nd of the month. The amount to be adjusted on the EPS is the SMP recovery, not the amount of SMP paid.

Payroll Alliance has received several reports from employers who have recovered SMP for tax month one successfully, but when they recovered SMP for month two, DMB advised them of an underpayment which was equal to the amount of SMP recovery for month one.

When an employer pays PAYE and NI, it should reduce the amount to be paid by the SMP recovery for that tax period. But when sending an EPS, the employer must adjust the figure for SMP recovery and NI due by the total amount to date, including recovery for previous months.

Linda Pullan is head of Payroll Alliance. Tel: 020 8662 2050

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