HMRC have provided clarification on the criteria for registering a PAYE scheme as annual.

To be considered as annual, a scheme must meet the following requirements:

• all the employees are paid annually
• all the employees are paid at the same time/same date
• the employer is only required to pay HMRC annually

If these criteria are not met, an employer must report in Real Time using a Full Payment Submission (FPS). If no payments are made in a particular tax month, the employer must advise this to HMRC using an Employer Payment Summary.

If a scheme is registered as annual but an employer submits more than one FPS in the year, HMRC will automatically cancel the annual payer status for that year and following years. As a result, HMRC's debt management processes will revert to expecting filing/payment on at least a monthly basis.

In reviewing requests for a scheme to be treated as annual, HMRC will check the employer's payment history to see whether such a request is appropriate. Employers requesting annual schemes where it is clear that they should be paying HMRC monthly will be considered non-compliant and liable to potential penalties.

HMRC advised that there has been a recent increase in the number of employers and agents requesting the registration of PAYE schemes as annual. As a result, currently HMRC are unable process requests from employers to:

• move to paying annually and register as an annual scheme
• change their payment frequency

We understand that HMRC are working to rectify this and will advise when this is possible.