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John Stokdyk

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Big employers gear up for online P45 and P46 switch in April

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HMRCApril will see a new online filing deadline for companies with more than 50 employees, who will have to start submitting in-year forms via the internet. John Stokdyk sets the scene.


After taking a year off to catch up with the housekeeping and tidy up some data protection issues, HMRC will roll out the next phase of Lord Carter’s programme for online filing. Once the new tax year begins on 6 April, firms with more than 50 employees will have to file ‘in-year’ PAYE forms such as P45s and P46s online.

The basic requirements of ‘Carter Two’ are simple – companies with 50 or more employees that already have to file Employer Annual Returns (P35s and P14s) online will also be required to submit in-year forms online, or face a fine of between £600 and £3,000. The forms affected are:

  • P45 Part 1 – leavers’ form

  • P45 Part 3 – joiners

  • P46 – when a new employee has no P45

  • P46 (Pen) – a new form being introduced in April, that will replace P160 and PENNOT forms for submitting details new pensions and annuity that are being paid.

An interactive PAYE demonstrator on the HMRC website presents a step-by-step guide to the new forms and their contents.

New style P45 forms
HMRC introduced new look A4 P45 forms in October to replace the old blue/green A5 versions, which are being phased out. The new forms come in the same four parts (one for the employee, one for the employer and two for HMRC), but include fields for the employee’s date of birth and genders. The new forms and data fields will have to be completed from 6 April, though employers who employ fewer than 50 people may still submit old-style paper P45s that are given to them by new employees.

Pre-printed P45s can be ordered from HMRC’s Employer Orderline, but they can also be printed out onto plain white paper from HMRC Online and from payroll processing software. Concerns have been voiced that employees and managers may confuse printed out P45s with photocopies.

“People who are not aware of the changes may be reluctant to accept them,” warned PAYE-IT’s Andrew Dove. “The other issue is fraud. The new forms could be mocked up in Word and printed out with inflated figures for previous tax paid. A fraudster could print off a bogus P45, get the tax rebate and run like hell. No form is totally secure, but plain paper leaves more openings.”

Lord Carter’s plan is for HMRC to achieve universal online filing by 2012, so small businesses as well as large should take note of the PAYE Online changes. From April 2010, companies with fewer than 50 employees will have to file end-of-year P35 and P14 returns online. Mandatory filing for in-year forms will begin for all PAYE schemes from April 2011.

Those companies who voluntarily opt to go online early will qualify for cash incentives – £75 if you have fewer than 50 employees and file your 2008-09 annual returns online.

Stephen Banyard, the HMRC official responsible for the Carter programme, this week appeared in a podcast to urge employers to get their affairs in order before April. The aim of the online filing programme was not to “catch people out”, but to make things simpler and faster for everyone.

“We hope this is a service employers will want to use because it’s a better way of doing things,” Banyard said in the podcast. Many employers are already using PAYE for in-year forms, with more than 3.5m received. “For those who are not – you need to get going now,” he added.

If you have not done so already, the first step is to examine how payroll is organised and to look at the processes behind it, Banyard advised – particularly where different branches submit joiner/leaver forms and a central team handles payroll. The next step is to confer with your payroll software supplier and ensure that their programs can handle the required forms and have been accredited by HMRC to submit them electronically.

The payroll software industry is ready, according to Andrew Dove of PAYE-IT, who chairs industry trade body BASDA’s HR and payroll special interest group. “In-year forms have been there for the past two to three years. Most packages were modified and ready for in-year filing to be made mandatory in 2008 and carried on from there,” Dove said.

The bigger struggle ahead is getting companies to make the transition.

“They won’t switch over until they have to,” Dove said. Lord Carter has estimated that firms could save up to £5 per P45 filed, but Dove pointed out that if a company is submitting just one or two P45s a month, it’s easier to continue putting a form in an envelope and sending it.

“Until HMRC does away with paper forms all together, a lot of people don’t want to be forced into sending it electronically. They’ve still got to give forms to employees, so they might as well post one off to HMRC at the same time,” Dove said.

As Dove points out, the new electronic filing regime will not do away with the P45s traditionally handed to employees when they leave – but the format and content of the forms will change from April (see box, right). “My biggest worry is about plain paper P45s – people may not realise they’re genuine – or fraudulent.”

Software developers try to look at all possibilities and with the extra year’s preparation, BASDA’s expert expects a smooth transition in April. “The system has been running OK so far, with 3.5m forms filed and the figures are increasing gradually each month. HMRC’s computers seem to be stable enough to cope.”

Dove admitted to being worried after the Self Assessment online filing system ground to a halt in January 2008, but HMRC put a lot of work into its systems during the past year. “Whatever changes they made last year, they worked,” said Dove. “Self Assessment stood up to the workload this year and there was no throttling back – the system was resilient. That bodes well for the end of the PAYE year.”

The rise in in-year forms will be more gradual from April, he predicted, so HMRC’s computers should take the strain.

“From the software industry’s point of view, we try to look ahead and anticipate what will happen, but we tend to find out about problems after the event. It’s only after something hits the street that you discover the weird things people do with it.”

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John Stokdyk

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