So what is a salary advance?
HMRC have recently issued an update on salary advances and RTI reporting requirements in the latest agent update on the Employer Bulletin, number 102.
A salary advance is exactly what it says, it's a portion of an employees pay they have earned, paid in advance of the normal pay date. This can be all of the salary, or some it, we feel it is actually a loan, however the legislation is a little unclear and we hope this article will point you in the right direction.
A salary advance is paid ahead of the normal pay date.
HMRC have said that these payments need to be treated as a payment on account of earnings, which means employers must submit additional real time information reports, (RTI), to record these payments.
This creates an extra burden on the employer and HMRC. The secondary legislation is due to be amended to allow salary advances to be reported on or before an employee's normal or contractual pay day.
Current legislation may change. Please always check the current legislation before acting on anything contained in these articles to ensure you have up to date information.
More information can be found about HMRC's announcement about salary advances and RTI reporting requirements, here
In real terms, what the employer is doing is loaning the employee money which the employer will recover at a later date. Under current legislation, no payment has actually been made as it is simply a loan to the employee. It is important to be aware of this as no additional reporting is required as the payment is a loan, not an advance of wages.
If you need help with this, or any other article on our website, or would like to discuss your payroll, please get in touch.
