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Rti - what info is used?

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Tara CAC
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With regards to claimants having 2 pay days reported in an assessment due to early reporting by employer because of non-working days

eg usually paid 18th of every month but paid the last working day before (usually Friday)

What information is received from HMRC and what information does UC use?

It states in ADM that it’s RTI payment info and what’s reported within the AP

Obviously this works for late reports as they can’t calculate award at end of AP with info they haven’t received yet, but what about early reporting?

PAYE regs state that the usual payday should be entered if paying early due to a non-working day.

So if the AP is 12-11th and they are usually paid 13th of the month does it matter what info is actually reported?

13th is Sunday so claimant is paid on Friday 11th. Employer sends RTI on Friday 11th.

Is the outcome different if employer enters 11th or 13th as the date paid?

RTI sent 11th, payment actually received 11th but would be expected 13th had it not been for those pesky weekends

Do payroll programs not have an automated system to send RTI on the usual pay day? Is there something preventing them sending it on a non-working day - other than having better things to do with their Sunday?

Gareth Morgan
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The HMRC guidance to employers says:

“Payment date The date you paid them, not the date you run your payroll. Use the normal payday if it falls on a non-banking day”

My understanding is, that if done properly, the relevant date sent by the employer should be the normal pay date, whether or not it is a non-banking day including weekends and bank holidays.  It should not be the actual pay date nor the date the payroll is run.  That date would be used by HMRC and passed across to DWP using the RTI system.

If it was done properly it should avoid a lot of the problems but many employers don’t do it properly.  I understand that HMRC are sending out new guidance to employers to emphasise the correct procedures

It won’t get rid of issues around weekly cycles, or last working day pay, of course.

Tara CAC
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That’s my understanding of paye regulations and rti. However there’s a lot of people who have raised an rti dispute following the example I mentioned and been turned down.

The NHS pay on 22nd and I’ve seen a number of 2 pays in assessment - though none were my clients so unable to confirm the finer details of the rti submission.

Is the rti submitted when they run payroll? Which is likely days before actual payment anyway.

If so then I’m right in thinking the issue is the date entered as paid.

Therefore early (and late but reassessment would be required) reported earnings should allow for successful rti dispute (despite actually receiving the payment in the assessment period) if they can evidence regular pay day? - based on inaccurate report by employer if date paid is not entered as the usual pay day?

I haven’t had a client whose employer entered the correct date and avoided this issue to test the theory!

Also cpag rough justice paper discusses this issue but I don’t remember seeing this as a recommended solution - get employers to follow paye regs.

Tara CAC
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Quote from Rough Justice pg 5/6

http://www.cpag.org.uk/sites/default/files/CPAG-2018-Rough-justice.pdf

Income is assessed each month on a strictly cash in/out basis, so any pay received during the assessment period
affects that month’s award regardless of when the work it relates to took place. This includes back pay, holiday
pay and advances from employers. Employees usually have their earnings assessed using HMRC’s real-time information system, reported directly to the Department for Work and Pensions (DWP), and income is recorded as
received on the date on which it is reported through this system regardless of the period to which it relates.

However, I haven’t heard of any issues from early reporting other than when paydays fall on a non-working day? If it was a case of earnings are counted as date reported via rti (opposed to date paid/usual paydate) then surely this issue would occur mid-week too where rti is submitted in an earlier assessment than when paid?

Is this a misunderstanding of ‘recorded as received on the date on which is reported through this system regardless of the period to which it relates’? is ‘reported’ interchangeable with date entered as paid and date of fps submission?

UC regs state information about earnings received - which I read as what is entered as paid.

Information for calculating earned income
61.—(1) Where—

(a)a person has employed earnings in respect of which deductions or repayments of income tax are required to be made under the PAYE Regulations; and
(b)the person required to make those deductions or repayments is a Real Time Information employer,
the information on which the calculation of those earnings is to be based for the purposes of determining the person’s earned income is the

****information about those earnings reported to HMRC in accordance with the PAYE Regulations.*****

(2) Where paragraph (1) does not apply or where a Real Time Information employer fails to report information to HMRC, the person must provide such information for the purposes of calculating the person’s earned income at such times as the Secretary of State may require.

(3) Where, by virtue of paragraph (1), the calculation of employed earnings is to be based on information reported under the PAYE Regulations, those employed earnings are to be treated as if they had been received by the person in the assessment period in which the Secretary of State receives that information, unless the Secretary of State has made a determination in accordance with regulation 54(2)(b) (estimate where information not reported) in relation to a previous assessment period.

[ Edited: 28 Sep 2018 at 12:52 pm by Tara CAC ]
WillH
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So following what Gareth has said, and looking at the HMRC guidance, for PAYE the payment has to be treated as made on the regular pay day, even if that is not in practice a pay day. In other words it is treated as made on the date that would usually be the pay day even if in that month it is in practice paid earlier. That is what the RTI info calls the ‘payment date’.

Reg 61(2)(a) says ‘based on the information’ etc etc, but that doesn’t necessarily mean UC have to use the payment date, more that it is information they use to decide how to treat earnings as being received following the principle of reg 54 (caselaw suggests). If UC were meant to use the same payment date as reported by the employer every time, it would say so??

In fact, experience suggests they don’t - otherwise why would the JR about early receipt of monthly earnings be necessary? (one of the appellants loses out because her wages are paid earlier than the normal pay day where it falls on a non-working day).

http://cpag.org.uk/content/universal-credit-assessment-period-inflexibility

In fact the rest of the reg suggests that UC have quite a lot of scope about when to treat earnings as paid. For example, if an employer got the payment date wrong (putting the day it was paid rather than the normal pay date), UC could decide to treat the earnings as falling into the later AP (in other words, as paid on the normal pay date not the date they were paid early). But presumably they are not doing this, because if they did, that would be the one time the reg 54 principle doesn’t apply, & earnings could be treated as received on the normal pay day under correct PAYE procedures & the UC regs.

But I’m wondering if I’ve missed something! This is such a common query in general that it would be good to clear it up - Gareth, I can see what you mean when you say the employer using the correct payment date would sort this out, but that would only be the case if UC then use that date too? It doesn’t make sense to me given the numbers of monthly paid people affected by the 2 payment date issue & the JR.

 

Tara CAC
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But the only time I’ve seen this happen is around non-working day paydate (or where the employer reports late).

When they are actually paid is irrelevant - dwp wouldn’t know what day they actually got paid - the date entered as paid or when rti is submitted to HMRC has to be the issue. Since I haven’t seen this issue with paydays on a normal working day it must be the date entered.

Uc have refused rti disputes stating it doesn’t matter when it’s paid it’s when it’s submitted, which must be rubbish as rti is often submitted before the date paid. And could they legally use information post dated as actually received?

Gareth Morgan
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WillH - 02 October 2018 06:18 PM

Reg 61(2)(a) says ‘based on the information’ etc etc, but that doesn’t necessarily mean UC have to use the payment date, more that it is information they use to decide how to treat earnings as being received following the principle of reg 54 (caselaw suggests). If UC were meant to use the same payment date as reported by the employer every time, it would say so??

It does says so:

“(2) Where a person is, or has been, engaged in an employment in respect of which their employer is a Real Time Information employer–
(a) the amount of the person’s employed earnings from that employment for each assessment period is to be based on the information which is reported to HMRC under the PAYE Regulations and is received by the Secretary of State from HMRC in that assessment period(a); “

Is to be based doesn’t give any scope for an alternative.  Additionally, practically this is the only information that they have and any other date would mean a manual process with lots of checking and evidence requirements.

WillH
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Well that is what I would have thought too. But the ADM examples show that DMs use the date HMRC report the info to DWP. In other words, it appears they use the date the RTI is received (regardless of the payment date reported?) It’s not clear as I couldn’t see any examples where the two were different, except one where the employer was very late in reporting & the claimant could prove the discrepancy (it’s ADM H3190 onwards). But it’s not clear if that is a discrepancy between date of reporting & date earnings received, or the payment date the employer gave & earnings received.

Is it possible that DWP concentrate more on the ‘received by the Secretary of State from HMRC in that assessment period’ clause of reg 61(1)(a), rather than ‘based on the information’?

I completely agree that if ‘based on the information’ means using the same payment date (‘based on’ still doesn’t seem definitive to me, but I take your point that it would be far too much trouble to do anything else), then the problem with early pay dates could just be sorted by the employer using the correct one, as you’ve suggested.

Further (& supporting your view I think Gareth) the regs seem to allow DWP to use a later AP in circumstances where the employer has got it wrong, eg given the actual date of payment rather than the later, regular pay day (sub para (5)(a)), so why is the JR needed? To me there’s still something which doesn’t make sense here - I’ve asked the CPAG solicitor about it, but the JR focuses on the rigidity of the AP, rather than the use of RTI.

Is it possible that:

DWP should use the payment date reported but instead use the date earnings are reported by HMRC?

There are simply too many employers putting the wrong payment date (ie the actual, earlier date earnings are paid, not the normal pay day)

DWP are failing to use their powers to rectify that (if that is what reg 61(5)(a) is for, in part)?

[ Edited: 3 Oct 2018 at 12:21 pm by WillH ]
Tara CAC
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It may be for where the employer got it wrong - so rti information is correct as per incorrect info provided by the employer. Also for late reporting, if an employer reports late (and after the end of an assessment period) then UC can’t use that information until the assessment period they receive it in?

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WillH - 03 October 2018 11:38 AM

so why is the JR needed?

While employers getting it right would solve some problems there are still lots caused by those in weekly based pay cycles (weekly, fortnightly or 4-weekly) and those with last pay day monthly pay and end of the month UC claims (which as Gary Vaux pointed out to me is disproportionately common as people often leave / change jobs at month ends).

Have a look at http://bit.ly/2IBcABJ to see the kind of issues, particulalrly for couples, around these periods.

[ Edited: 3 Oct 2018 at 12:44 pm by Gareth Morgan ]
WillH
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Yes - although reg 61(4) & (5) allow them quite a lot of scope. There’s an example in the ADM where an employer is very late reporting, the claimant asks DWP to look at it again & they end up using the date wages were received. But that isn’t the same issue, it’s a very late reporting issue rather than an early pay day issue.

Also, DWP can & do change decisions. Starting to see UC o/p disputes because of this. Eg RTI info arrives after the end of an AP but DWP then treat earnings as being received earlier than the reporting date (in contrast to what I’ve suggested in the previous post!)

I don’t know what the basis of that is because it’s not easy to get the actual RTI from them (obviously it should be requested if someone is disputing a decision).

WillH
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Gareth - think we crossed posts.

Yes, there are numerous problems for weekly, 4 weekly etc paid claimants, & that is a good point from Gary about how easy it is to end up with an awkward AP for monthly paid claimants too. Thanks for the link (very useful).

However, one of the JR claimants is specifically a monthly paid person who loses out when she is paid early due to holidays/weekends. And, yes, it is also due to her AP dates. But I’m still not getting it - would her problem not be solved by the employer giving the correct payment date?

http://cpag.org.uk/content/universal-credit-assessment-period-inflexibility

[ Edited: 3 Oct 2018 at 12:54 pm by WillH ]
Daphne
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Isn’t the ‘regular’ pay day for the claimant in the JR the last working day of the month (not the last day of the month) which is what causes the problem - that was my understanding from the CPAG seminar I went to where it was covered? So she isn’t paid early - she’s paid on the correct day.

WillH
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Daphne - I think there are two claimants. One is paid on the last working day. So, different issues there.

The other is paid on the 28th unless it falls on a non-working day, and has an AP of 28th to 27th. It’s the second one that I’m unclear about.

Tara CAC
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The one paid on the last working day of the month loses out compared to the others (weekly, fortnightly, 4 weekly) as they get extra on the lower number of payday months to account for lower on the higher months.

(over the year…if their pay cycle stays the same that is)

The paid on the 28th should be ok as long as the employer enters the date paid as the usual paydate (even if paid early due to weekends/bank holidays)

This has to be the issue else we’d see people with set monthly paydates having the same issues even when their paydate is during the week.

- yes late reporting is a separate issue to the early report scenario I was referring to why the regulations are worded the way they are - I should really use the quote function!

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The results of different periods can be very odd ; in particular where there are some months with 1, 2 or no pay periods used in the assessment.  It gets complicated by work allowances and other factors and there can be winners and losers.

Here’s an artificial example to demonstrate the maths.  This is not a real situation

Imagine someone earning £1,000 a month net and getting £500 a month Universal Credit in assessment periods when they have one pay day.

Simplistically, we can assume that the £1,000 has reduced the Universal Credit maximum by the tapered amount,, so that means that £630 has been taken from maximum UC.  Maximum UC is therefore £630+£500 = £1,130.

In a month with 2 paydays, the income is £2,000, the deduction is £2,000 * 63% = £1,260.  That’s more than £1,130 so the result is zero UC.

In a month with no paydays, there is no income so Universal Credit is paid at maximum of £1,130.

Average for the 2 months is £565 so the claimant is gaining £65 a month.

In this particular case they won’t even get hit by the surplus earnings rules when the buffer for that is reduced to £300 next April.

[ Edited: 3 Oct 2018 at 03:36 pm by Gareth Morgan ]
Tara CAC
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the poor people paid on the last working day with AP close to pay date end up losing out on any work allowance which just seems massively unfair and quite a huge hit to their income, all because they likely got paid a day or 2 before the end of an assessment!

Gareth Morgan
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It doesn’t, necessarily, mean they lose. Some can gain, as above, including people with work allowances.  It all depends on their needs and earnings.

[ Edited: 3 Oct 2018 at 04:51 pm by Gareth Morgan ]
WillH
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Thanks Gareth - good point about some people gaining. As with the whole concept of APs in general, there are winners & losers.


One problem with helping claimants is that an adviser might know their AP, what their ‘normal’ pay day is, when they actually got paid in any AP - but won’t know what the employer put in the RTI, or when DWP received it (until they tell you that’s why they’re allocating it to a particular AP). Info requested as part of the appeal process appears to be forthcoming but still not necessarily clear.

[ Edited: 4 Oct 2018 at 10:16 am by WillH ]
Tara CAC
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Gareth Morgan - 03 October 2018 04:01 PM

It doesn’t, necessarily, mean they lose. Some can gain, as above, including people with work allowances.  It all depends on their needs and earnings.

i was referring to those paid the last working day of the month who receive enough earnings in one month to reduce award to 0 and have no earnings reported in the next month, they lose their work allowance if they have one - again, i really should use the quote function!

and this is essentially one of the issues with the early reporting with non-working days.

Employers can send an amended FPS with correct date which should help towards an rti dispute but as ever with UC consistency is lacking in how they respond or if they reassess the AP with new/amended info

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Tara CAC - 04 October 2018 10:50 AM

i was referring to those paid the last working day of the month who receive enough earnings in one month to reduce award to 0 and have no earnings reported in the next month, they lose their work allowance if they have one

So was I.  Yes they lose a work allowance but they gain 63% of a months earnings.  It tends to even out for people whose UC is reduced but those who lose UC can get more overall, at the cost of having to reclaim.

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Gareth Morgan - 04 October 2018 12:29 PM
Tara CAC - 04 October 2018 10:50 AM

i was referring to those paid the last working day of the month who receive enough earnings in one month to reduce award to 0 and have no earnings reported in the next month, they lose their work allowance if they have one

So was I.  Yes they lose a work allowance but they gain 63% of a months earnings.  It tends to even out for people whose UC is reduced but those who lose UC can get more overall, at the cost of having to reclaim.


No, those paid weekly, fortnightly, 4wkly will even out - as long as it’s a continuous claim to benefit from more uc on less payday Ap

Those paid monthly on the last working day haven’t gained another payday!

They just receive 2 earnings in one ap when it would normally be spread over 2. So lose 63% of the work allowance.

For example

Monthly £1000 net earnings and £1200 max uc

If they have 198 work allowance their usual total uc (after earnings taper) plus earnings = £1694.74

So for a 2m period (with 1 payday in each) it would be £3389.48

2 earnings £2,000 would reduce uc to 64.74 = £2,064.74

Next month 0 earnings = £1200

Total 2m

£3389.48
Vs £3264.74

They’ve lost £124

 

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Tara CAC - 07 October 2018 08:44 PM

Those paid monthly on the last working day haven’t gained another payday!

They just receive 2 earnings in one ap when it would normally be spread over 2. So lose 63% of the work allowance.

For example ...

They’ve lost £124

Yes, for them.  But look at someone earning the same, and in the same AP, who gets £350 UC normally.  Using your layout:

Monthly £1000 net earnings and £855.26 max uc

If they have 198 work allowance their usual total uc (after earnings taper) plus earnings = £1,350

So for a 2m period (with 1 payday in each) it would be £2,700

2 earnings £2,000 would reduce uc to 0 = £2,000

Next month 0 earnings = £855.26

Total 2m

£2,855.26
Vs £2,700

They’ve gained £77.63 a month; £155.26 in total.

The switch to gains happens when there is no UC in the month with 2 paydays.

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What happens if someone receives more money than they would otherwise get due to an RTI mistake? There is provision for the claimant to challenge RTI and have alternate info used, but can UC do this to raise an overpayment?

For example - Clt entitled to £317 on UC. Starts work and is paid £600 each in 2 APs. If reported correctly, this reduces UC for both APs to £0 (no work allowance). Employer reports only £200 in 1st AP and then £1000 in 2nd AP, so Clt receives £191 in 1st AP and £0 in 2nd AP. Can UC challenge the RTI in order to recover the £191 as an overpayment?

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Gareth Morgan - 08 October 2018 12:08 PM

The switch to gains happens when there is no UC in the month with 2 paydays.

In the month with 2 earnings payments once UC has gone down to zero it can’t go any lower. Therefore a part of the earnings have no impact on the UC amount, effectively they are disregarded rather than taken into account at the taper rate at 63%.

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Ianb - 08 October 2018 04:41 PM

In the month with 2 earnings payments once UC has gone down to zero it can’t go any lower. Therefore a part of the earnings have no impact on the UC amount, effectively they are disregarded rather than taken into account at the taper rate at 63%.

Exactly, As I said earlier “...they lose a work allowance but they gain 63% of a months earnings”

[ Edited: 9 Oct 2018 at 08:42 am by Gareth Morgan ]
Tara CAC
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Ianb - 08 October 2018 04:41 PM
Gareth Morgan - 08 October 2018 12:08 PM

The switch to gains happens when there is no UC in the month with 2 paydays.

In the month with 2 earnings payments once UC has gone down to zero it can’t go any lower. Therefore a part of the earnings have no impact on the UC amount, effectively they are disregarded rather than taken into account at the taper rate at 63%.

thanks that helped it click! Was looking at the calculations thinking I know the math is right but I can’t grasp why it’s a gain!!

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Gareth Morgan - 08 October 2018 12:08 PM

The switch to gains happens when there is no UC in the month with 2 paydays.

I’ve never done the calculations with those figures, thanks I get it now!

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Income Max - 08 October 2018 04:12 PM

What happens if someone receives more money than they would otherwise get due to an RTI mistake? There is provision for the claimant to challenge RTI and have alternate info used, but can UC do this to raise an overpayment?

For example - Clt entitled to £317 on UC. Starts work and is paid £600 each in 2 APs. If reported correctly, this reduces UC for both APs to £0 (no work allowance). Employer reports only £200 in 1st AP and then £1000 in 2nd AP, so Clt receives £191 in 1st AP and £0 in 2nd AP. Can UC challenge the RTI in order to recover the £191 as an overpayment?

I’ve found UC to be inconsistent with how they handle this, often making it difficult or point blank refusing a rti dispute as according to rti info the client’s award is correct even though rti info is not correct (as per PAYE regs and actual earnings).

The employer can send an amended fps report though to reflect true payments which would help towards a rti dispute or MR. As would evidence such as payslips and bank statements.

It’s not for UC to question how pay is reported, but HMRC may do something to enforce reporting in the correct tax periods as it’s effectively late reporting.

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Tara CAC - 08 October 2018 08:57 PM

... refusing a rti dispute as according to rti info the client’s award is correct even though rti info is not correct (as per PAYE regs and actual earnings).

The problem is that the regs say “the amount of the person’s employed earnings from that employment for each assessment period is to be based on the information which is reported to HMRC under the PAYE Regulations “.

It doesn’t say based on the correct information that should have been reported.

I wonder what the employer’s liability would be found to be, if the employee loses benefit because they use an incorrect date or amount?

[ Edited: 9 Oct 2018 at 08:47 am by Gareth Morgan ]
Tara CAC
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Gareth Morgan - 08 October 2018 05:22 PM
Ianb - 08 October 2018 04:41 PM

In the month with 2 earnings payments once UC has gone down to zero it can’t go any lower. Therefore a part of the earnings have no impact on the UC amount, effectively they are disregarded rather than taken into account at the taper rate at 63%.

Exactly, As I said earlier “...they lose a work allowance but they gain 63% of a months earnings”

Thought I had the concept! But a client whose earnings only just cancel out their award lose out too.

So to win, and gain 63% of excess earnings their earnings have to be above the threshold that cancels their UC plus any work allowance.

So only earnings more than max uc divided by 0.63 plus work allowance will benefit. And only by 63% of earnings above this amount?

I think that works out correct?