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BACS Hash for RTI Formally Adopted

August 31, 2012

HMRC have announced the adoption of the BACS hash code. Given under the Income Tax (Pay as you Earn) Regulations 2003 on 28 August 2012 by the Commissioners of HMRC, this directive formally recognises the obligation of employers to use a hash code when they pay their staff using direct BACS. This was done by means of a new statutory instrument, The Income Tax (Pay As You Earn) (Amendment No. 2) Regulations 2012 No. 1895.

This confirms the legal basis for the feature of PAYE RTI where employers, who choose to pay by direct BACS, have the protection of a second unique payment reference. This second payment reference, known as the hash code, is generated  automatically by payroll software and inserted into both the employer’s BACS payment instructions and their PAYE return or Full Payment Submission, every time payroll is run.

Unlike users of standard internet banking, employers using the direct BACS payment channel can rely on their date and time receipted payment instructions issued directly by the BACS network to demonstrate their compliance with their PAYE RTI reporting obligations.

HMRC have previously made clear that they intend to rely on the BACS hash to inform their compliance and risk-assessment checks.

The directive confirms that the hash code feature is only available to employers using direct BACS which requires the use of a BACS Service User Number or SUN and not standard internet banking paymnents. The significance of the BACS SUN is that it identifies the origination and termination of the employer’s payroll payments. The directive also lays down the technical standard payroll software has to use for the generation of the hash code, which follows an internationally recognised protocol governed by US Federal Information Processing Standards.

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