Bye Bye Earlier Year Update (EYU)

13 Dec 2018

On the 29th of November 2018, HMRC’s software development team wrote to software developers announcing the demise of the Earlier Year Update (EYU) RTI submission. The Global Payroll Association replicates this in full for the benefit of the UK payroll profession:

Dear Developer

PAYE RTI – Introduction of Year to Date Amendments for Earlier Tax Year Payroll Data

Current Process

Where an inaccuracy in payroll data is identified after the end of the Tax Year and not amended before the 19 April, HMRC requires an employer to submit an Earlier Year Update (EYU) to correct the account. This process involves the employer calculating the difference between the original submission and the correct position for each employee and submitting the difference (the delta amount) on an EYU.

Future Process

From April 2019 we will be extending the use of the RTI Full Payment Submission (FPS) to allow employers to continue to report revised Year to Date (YTD) payment data after the current deadline of the 19^th April, following the end of the Tax Year. This will simplify the process by removing any unnecessary complexity and will align HMRC systems and employer payroll records sooner.

When is the change happening?

From 20 April 2019 we will be accepting RTI FPS’s with YTD information to make amendments to the Tax Year ending 05 April 2019. To aid the transition to the new process HMRC will still accept an EYU to make amendments to this tax year. In this transition year Employers will need to choose one of these methods for amendments and continue with this for any further amendments to the year as required. From April 2020 the EYU will no longer be a valid submission to make amendment to the Tax Year ending 05 April 2020 and any amendments will need to be made using an FPS. To summarise:

Amendments to the Tax Year ending 05 April 2019 from 20 April 2019 – an EYU or FPS will be accepted. This is to be a pilot year and the use of the FPS after the year end will be voluntary.
Amendments to the Tax Year ending 05 April 2020 (and future years) from 20 April 2020 – will be made by the submission of an FPS
Amendments to Tax Years ending 05 April 2018 and earlier – will be made by the submission on an EYU
The Employer Payment Summary (EPS) will not be impacted by this change.

From 20 April 2020 onwards HMRC’s Basic PAYE Tools software will be updated to allow customers to submit FPS’s for the year ending 5 April 2020 and onwards, to report any amendments.

It is not anticipated that any changes will be made to the format of the FPS when it is used after the 19 April following the year end. The FPS will provide an update to the last period reported, with a matching or later pay date for the individual, to indicate a change in the year to date figures.

Further information on the changes will be published in our Employer Bulletins on 15 February 2019 and 11 April 2019 and our Agent Updates on 25 February 2019 and 23 April 2019. All HMRC and GOV.UK guidance will be updated prior to the implementation of the changes.

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In our opinion, the EYU has always been a controversial and unacceptable way of correcting errors after the 19^th of April. On the surface, it seems absolutely fine to adjust the year to date figures that HMRC have on their systems as long as:

We know what figures HMRC are holding and can make the right adjustment. In the GPA’s experience, just because employers send the FPS and the payroll system holds one set of cumulative figures, this does not mean that HMRC’s systems are holding the same figures (!)
Payroll software is capable of sending the EYU submission. Some software products do not have the EYU capability and employers have to use HMRC’s own Basic PAYE Tools product

So the move to abolish it completely from 2020 seems a welcome one and we look forward to seeing more details about the change in 2019. Although we would comment on a couple of points that stand out:

HMRC’s announcement says that they do not anticipate making changes to the FPS format. Negative pension contributions sometimes have to be reported on the EYU for example where refunds are made relating to the previous tax year. They cannot be reported on the FPS so we assume that there will have to be a change to the specifications
Some payroll products are programmed that the FPS is only generated after the payroll run as part of closing one pay period and opening the next. A FPS containing year to date values implies that this is generated independently of payroll processing so some software products will have to be amended

The GPA hopes that there is sufficient and thorough liaison with the software developer community. It is admirable to make this change but not without talking to the relevant people first. After all, payroll software and their developers are integral to making this a success and the GPA hopes that they will be issued a formal specification.