The traditional P45 form that summarises the amount of tax paid at the end of an employment contract will not be scrapped after a change of heart at HM Revenue & Customs.
The form had been due to be replaced by a ‘leaver statement’ as part of the move to the Real Time Information system for PAYE in 2013-15, under which employers will be expected to submit data electronically to the taxman when employees leave and join.
But HMRC’s acting director general for personal tax Stephen Banyard said on Monday: “Employers told us to keep the P45 – which is exactly what we have done.”
Under the revised plan, P45s will continue to be issued to employees to take to their next employer. Employers will then submit the leaver and starter information to HMRC as part of their normal RTI submissions.
The Chartered Institute of Taxation wrote to the government agency in November to request that any change in the rules be held back until RTI has bedded in.
Colin Ben-Nathan, chairman of CIOT’s employment taxes sub-committee, said the new decision was a “sensible” response that would help to reduce possible disruption and confusion around the introduction of RTI.
“The removal of the requirement to provide a P45 was well intentioned, but doing so this year would have been premature and potentially confusing for employers, employees and even government itself,” he explained. “Introducing an alternative document alongside the P45 without an adequate educational process and amendment of rules and training manuals would be confusing and likely to increase bureaucratic burdens, the opposite of the government’s intentions.”
