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UC claim closed after early payment of wages before Christmas

Pete at CAB
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Cl has had their UC claim closed after being paid wages on 20.12.19 rather than at the end of the month and therefore having two payments in their assessment period.

This wasn’t supposed to happen, HMRC sent a note to employers to say that early payments before Christmas should be reported as having been made on the normal pay date, thereby avoiding UC problems;

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/839773/English.pdf


I was wondering if it might be possible to appeal the UC decision under Reg 61 UC regs, in the light of the HMRC bulletin the employer seems to have reported earnings incorrectly and it seems reasonable to say that if UC were aware of the HMRC bulletin it was probably within their powers to treat the reported earnings as having been made on the last day of the month.

Any thoughts or observations gratefully received, I am very concerned that the cl. does not get stuck betwen employer and UC, each blaming the other.

stevenmcavoy
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be very interested to see others opinions on this but…from my memory of the case where lone parents took court action on this issue as it impacted them negatively, although they won their case the issue was passed back to the uik gov to make the regs compliant rather than giving an alternative reading.

I think irrespective of how hmrc say these earnings should be reported, i think on current definition its still based on when they are received.

(this could all be totally wrong. as i said interested in others thoughts).

HB Anorak
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If the double salary extinguished UC for that month, they are likely to be better off across the whole two-month period because the next UC calculation will be based on nil earnings. The way the surplus earnings, work allowance and taper interact, it’s typically better to have a month of nil UC followed by a month of nil earnings.  See how the dust settles at the end of January.

Gareth Morgan
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One very possible cause of these problems is software.  I’m told by some knowledgeable people in the payroll industry that a number of software systems only allow one date to be sent to HMRC.  There should be two date fields; one for actual date of payment and one for ‘real’ payment date (that due).  In the absence of 2 dates they will send the actual date.

stevenmcavoy
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Gareth Morgan - 07 January 2020 11:55 AM

One very possible cause of these problems is software.  I’m told by some knowledgeable people in the payroll industry that a number of software systems only allow one date to be sent to HMRC.  There should be two date fields; one for actual date of payment and one for ‘real’ payment date (that due).  In the absence of 2 dates they will send the actual date.

well then every payroll system will just have to change to suit the whims of dwp policy decisions obviously.

Gareth Morgan
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HB Anorak - 07 January 2020 11:55 AM

If the double salary extinguished UC for that month, they are likely to be better off across the whole two-month period because the next UC calculation will be based on nil earnings. The way the surplus earnings, work allowance and taper interact, it’s typically better to have a month of nil UC followed by a month of nil earnings.  See how the dust settles at the end of January.

A) They probably need the money now
B) They’ll have to reclaim
C) They could be hit by surplus earnings; more likely if the buffer drops to £300 in April
D) Work allowances, depends on whether earnings are normally less or more than any allowance but they’ll only have one month’s allowance instead of two

stevenmcavoy
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Gareth Morgan - 07 January 2020 12:01 PM
HB Anorak - 07 January 2020 11:55 AM

If the double salary extinguished UC for that month, they are likely to be better off across the whole two-month period because the next UC calculation will be based on nil earnings. The way the surplus earnings, work allowance and taper interact, it’s typically better to have a month of nil UC followed by a month of nil earnings.  See how the dust settles at the end of January.

A) They probably need the money now
B) They’ll have to reclaim
C) They could be hit by surplus earnings; more likely if the buffer drops to £300 in April
D) Work allowances, depends on whether earnings are normally less or more than any allowance but they’ll only have one month’s allowance instead of two

im going to need to think this one through with some scenarios but any i have seen have been worse off due to D where two wages have been counted in one assessment period.

Gareth Morgan
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stevenmcavoy - 07 January 2020 11:59 AM

[
well then every payroll system will just have to change to suit the whims of dwp policy decisions obviously.

They certainly should do, but I’ve just had a call from a payroll consultant screaming about the budget date and the impossibility of inplementing any changes by April.  They are wondering whether this years tax changes will go back to the old system of being implemented in May.  I suspect that UC is far away from toip of their list.

Pete at CAB
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Gareth, re the reclaiming etc - that’s exactly right!

HB Anorak
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As far as needing the money now goes, I did consider that.  This is a potential MR/appeal - by the time it is upheld (if it is upheld) the moment has passed and we will almost certainly be beyond the end of the second month.  That’s why I thought it would be wise to look at the situation across the whole two-month period - it’s already too late for the claimant to have the money in December.

Don’t forget the surplus earnings rule exists precisely because people can be better off having high earnings in one month and none the next - it’s to deter claimants and employers from gaming the system.

Pete: any chance of some numbers on your case so we can work it out: earnings, max UC, whether there is a work allowance?

[ Edited: 7 Jan 2020 at 12:25 pm by HB Anorak ]
Charles
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Gareth Morgan - 07 January 2020 11:55 AM

One very possible cause of these problems is software.  I’m told by some knowledgeable people in the payroll industry that a number of software systems only allow one date to be sent to HMRC.  There should be two date fields; one for actual date of payment and one for ‘real’ payment date (that due).  In the absence of 2 dates they will send the actual date.

FPS submissions actually only have one date field. Some payroll software may* allow you to enter two dates as part of the process of running payroll, but only one will actually get reported to HMRC. Employers should be following HMRC guidance and putting the due date of payment in that field.

*I haven’t actually seen this myself.

MareeH
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stevenmcavoy - 07 January 2020 12:03 PM
Gareth Morgan - 07 January 2020 12:01 PM
HB Anorak - 07 January 2020 11:55 AM

If the double salary extinguished UC for that month, they are likely to be better off across the whole two-month period because the next UC calculation will be based on nil earnings. The way the surplus earnings, work allowance and taper interact, it’s typically better to have a month of nil UC followed by a month of nil earnings.  See how the dust settles at the end of January.

A) They probably need the money now
B) They’ll have to reclaim
C) They could be hit by surplus earnings; more likely if the buffer drops to £300 in April
D) Work allowances, depends on whether earnings are normally less or more than any allowance but they’ll only have one month’s allowance instead of two

im going to need to think this one through with some scenarios but any i have seen have been worse off due to D where two wages have been counted in one assessment period.

An easy (and typical) example would be, couple, 2 kids, LHA for 2 bedroom:

Joint element             £498.89
Child element             £508.75
Housing element         £531.68

Total UC                 £1,539.32

Earnings                   £2,000.00
Deduction for earnings £1,079.19

UC Payable               £460.13

With wages in each payment period UC would be a total of £920.26 over two months.
If two sets in wages first would be UC of zero, second would be full entitlement of £1,539.32.

There would be issues such as claimant commitments with no earnings reported, and a very slight benefit cap (£21.73) if the grace period wasn’t applied.

When surplus earnings reverts to £300 then there would be surplus of £1,256.63 carried forward as earnings to the following month in this example.

 

[ Edited: 7 Jan 2020 at 04:26 pm by MareeH ]
Charles
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MareeH - 07 January 2020 04:23 PM

When surplus earnings reverts to £300 then there would be surplus of £1,256.63 carried forward as earnings to the following month in this example.

I think this would actually be £969.63 carried forward.

Vonny
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Whilst in shinny new administration, with new MP’s all over the place (luckily not here), is this a good time to report these problems to MP’s, along with what the result could be next xmas with £300 surplus earnings and encourage changes in the April budget.  Especially if you have a shinny new MP of the government’s party!

HB Anorak
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Charles - 07 January 2020 04:40 PM
MareeH - 07 January 2020 04:23 PM

When surplus earnings reverts to £300 then there would be surplus of £1,256.63 carried forward as earnings to the following month in this example.

I think this would actually be £969.63 carried forward.

Yes, 969.63:

2 x 2000 - ((Max UC / 63 x 100 + 287) + 300)

Which still leaves them better off overall - earnings taper in month 2 would now be £429.66, leaving UC entitlement of just over £1100.

MareeH
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HB Anorak - 07 January 2020 05:49 PM
Charles - 07 January 2020 04:40 PM
MareeH - 07 January 2020 04:23 PM

When surplus earnings reverts to £300 then there would be surplus of £1,256.63 carried forward as earnings to the following month in this example.

I think this would actually be £969.63 carried forward.

Yes, 969.63:

2 x 2000 - ((Max UC / 63 x 100 + 287) + 300)

Which still leaves them better off overall - earnings taper in month 2 would now be £429.66, leaving UC entitlement of just over £1100.

Yes, absolutely correct.  Must double check my figures before posting - I missed out the work allowance…..

Gareth Morgan
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Charles - 07 January 2020 12:29 PM
Gareth Morgan - 07 January 2020 11:55 AM

One very possible cause of these problems is software.  I’m told by some knowledgeable people in the payroll industry that a number of software systems only allow one date to be sent to HMRC.  There should be two date fields; one for actual date of payment and one for ‘real’ payment date (that due).  In the absence of 2 dates they will send the actual date.

FPS submissions actually only have one date field. Some payroll software may* allow you to enter two dates as part of the process of running payroll, but only one will actually get reported to HMRC. Employers should be following HMRC guidance and putting the due date of payment in that field.

*I haven’t actually seen this myself.

Yes but if the software has 2 fields then it can ensure that the correct date is passed to HMRC in field 43.  Some software packages e.g. Cintra do this, others e.g.Moorepay don’t. I’m told that HMRC do have the capability to derive the payday from other information that is sent, as long as the employee is paid via the Bacs system.  My understanding is that the payment date is crucial for HMRC purposes as they use it to determine whether the employer has filed the FPS on time.  The legislative requirement is for the FPS to be filed on or before payday.  However, as HMRC do not know the payday they use the payment date field.

Getting HMRC and DWP to agree and understanf the importance of these dates and to insist that, and allow, the employers to use the dates seems to be the only way forward.

dizzymare
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hopping onto this thread as its similar circumstances (hope thats ok)

so ... if the proposed £300 de minimis goes ahead in April, my thoughts are that as well as people who might have xmas bonus, early payday etc. lots of workers who get paid on a different date at the end of the month, (and 4 weekly paid) could be affected by this - possibly several times in a year. Im thinking of one of my historical clients who works for an LA. sometimes pay day falls on 24 th month and sometimes on 30th for example.  She gets caught about 3 x year by having 2 paydays in one month, and this always causes her UC to close. From April, she could also get hit by the surplus earnings rule. I haven’t done the sums, but this could leave her living on a very low income for possibly several months, but in fact, she hasn’t had any extra money - just the date that she was paid has moved.  Seems to me that this is totally against the incentive to work and that it will leave a lot of people in financial hardship. Im not relishing trying to explain all of this to clients, and actually working out someone’s UC could also be difficult unless you have all of the relevant information on past earnings, previous claims etc.  - am I overthinking this?

Gareth Morgan
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dizzymare - 10 January 2020 10:51 AM

Im not relishing trying to explain all of this to clients, and actually working out someone’s UC could also be difficult unless you have all of the relevant information on past earnings, previous claims etc.  - am I overthinking this?

Have a look ay http://www.ferret.co.uk/reckoners/demo/surplus/surplus.htm

This works out the reducing surplus income firgure, month by month.  It’s a demo, so don’t even think of using it with real cases, but it gives you an idea of the process and complexities.  Make sure you set a date where £300 is the earnings figure in the question, not £2,500.

Then change the new earnings in those months.

To make your day, look at couples and play around.

dizzymare
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thank you for posting Gareth. Could I ask you to check that link as I cant seem to access anything (tried direct from link and also typing address manually)

thank you again

HB Anorak
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Dizzymare: if the the client you are describing is a renter with the lower work allowance, or has no work allowance at all, then she is currently receiving more UC in total than would be the case if she received the same salary on the same date every month.  The reduction of the surplus to £300 will limit her gains, but she is still likely to be better off by having irregular pay dates.  See the worked example further up the thread by MareeH, refined by Charles and me, where we show that a “vanilla” renter family gains £200 or so over two months by having a month of nil UC and surplus earnings.

The claimants in the JR case had a very particular combination of circumstances that made them worse off: they had work allowances and they had residual UC entitlement in the month with 2x salaries.  That meant that none of their earnings escaped tapering across the whole two months, but they only got one work allowance against which to offset their combined two months’ earnings.  They therefore lost out across the whole two months.

Even where the claimant gains in cash terms, it is true that spikes and gaps in UC play havoc with your budget and some people might be prepared to sacrifice a few hundred pounds of UC each year in exchange for a guaranteed steady amount.  But the OP’s case that kicked off this thread was an MR of December’s UC - he cannot now make it so that she got some UC in December because she didn’t and December has gone.  So my advice was: don’t bother with an MR at this stage of the game, your client will be better off by the end of January if she just leaves it.

Abi Sheridan
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Correct me if I’m wrong, but is this not similar to R(Johnson), ie- UC should take into account when the money was EARNED, not paid?
CPAG are challenging this, and advise that you should stick in an MR so that when R(Johnson) is resolved your case will also be.
The template MR also has all the calcs included (might want to double check them as I think the work allowance numbers are last tax year).

https://cpag.org.uk/welfare-rights/legal-test-cases/universal-credit-assessment-period-inflexibility

dizzymare
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My case is historical (in so much as I cannot do anything else currently), and I was just considering the effects on a claimant in circumstances such as hers, when the surplus earnings de minimis amount reduces from £2500 to £300. We have already registered a MR for this case, and are awaiting the outcome of the court case for her (and other clients). I was just turning over some cases in my mind really, and considering the effects, as we haven’t really seen anyone to date due to the current threshold. I will spend time next week to do some calculations using her earnings and dates of UC closure in the past for an example to see what the overall losses (or gains) might be.  It will make it very difficult to budget for people (who already don’t understand the 2 paydays in one AP). Lots of calculations for me next week to convince myself as to the ‘better off’ scenario.  Thank you Abi and Peter

HB Anorak
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OP’s case is different from Johnson, as I will keep saying until someone listens.  Johnson group of claimants lost out by virtue of having some UC entitlement in the AP with two salaries - this meant every penny of both salaries was taken into account but only one work allowance across both months so they received less UC over the two-month period than they would otherwise have got and experienced budget disruption.

Many claimants affected by this phenomenon will gain in cash terms - like the OP’s case in this thread.  Yes they have the budgeting disruption, but I am afraid submitting an MR/appeal after the event cannot make it so that the budgeting disruption never happened.  If you have already had the budgeting disruption, what you want now is as much UC as possible next time around, and you get that by not submitting an MR/appeal.

The only people who will gain from MR/appeal are exact Johnson look-alikes, and that is by no means everyone with the two salary issue.

As for fortnightly/four weekly paid workers, these will mostly break even or gain compared with people on a steady monthly salary.

Before advising people to challenge decisions, advisers need to run the numbers and you might be surprised at the outcome.  Remember budgeting disruption cannot be remedied retrospectively, once the two-salary month has passed it’s all about maximising entitlement.

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dizzymare - 10 January 2020 01:59 PM

thank you for posting Gareth. Could I ask you to check that link as I cant seem to access anything (tried direct from link and also typing address manually)

thank you again

Try https://www.ferret.co.uk/reckoners/demo/surplus/surplus.htm