Salary advances are arrangements between an employer and an employee, allowing employees access to some of their earned salary before their normal payday. Employers may also make arrangements through a third party, the latter charging a small fee for their services.
Under current legislation, these advance payments are treated as a payment on account of earnings. This means that employers must submit additional RTI reports to record these advance payments.
However, HMRC recognises that the statutory position, if applied to salary advances, creates extra administrative burdens for both employers and HMRC because it would require them to submit additional RTI returns.
Additional returns may also impact HMRC processes, such as the risk of PAYE coding or Universal credit errors.
To address these issues, HMRC will amend secondary legislation, so that salary advances can be reported on or before the employee’s contractual payday. This means each payment of salary only needs to be included on an RTI report once.
Employers who are currently reporting salary advances on or before the contractual pay date may continue to do so until legislation is in place.
