In the HMRC agent update 96 published 19th May 2022, revised guidance has been issued in relation to the late receipt of P45s from employees that miss the first payment and the intial Real Time Information (RTI) Full Payment Submission (FPS).
Often employees mislay their P45, or the former employer has not yet issued the form to their leaving employee. Equally, employees may not have been asked for, or completed the starter checklist by their new employer – this is required for all first payments to new employees.
Missing Starter information
HMRC receive high numbers of new starter records annually from multiple employers without either the P45 values, nor a signed starter checklist declaration! These end being submitted under an emergency unsigned ‘C’ declaration with the emergency application of tax code ‘0T’ on a week 1 / month 1 tax basis. Alternately, if the first FPS has no new starter information without a preexisting HMRC record, HMRC will assume there is a duplicate employment occurring and make similar assumptions. Prior HMRC guidance allowed for the application of a late P45 and starter checklist information, but only if HMRC had not already issued a tax code!
Sometimes cross-over occurrs between the collection of the starter checklist or P45 information and an electronic tax code issued by HMRC between payment dates. Employers could face Determination 80 liabilities where the wrong tax code has been applied with employer being accused and facing pursuit of the employees underpayment of tax by HMRC where the employee has blamed their employer for getting it wrong!
Agent update 96 – change
However, Agent update 96 issued on 19th May 2022 instructs agents to operate differently and no longer apply late P45’s.
“Tell HMRC about a new employee
When adding a new employee onto your payroll system you should use the employees P45 information to record their previous pay, tax and student loan (if applicable).
If the employee does not have a P45, you can use the starter checklist available.
After the starter checklist is added and submitted on your full payment submission (FPS) only use any tax code or previous pay or tax changes received directly from HMRC.
If you use the starter checklist to add the employee onto your payroll records and you receive the P45 after you have submitted your first full payment submission, you do not need to update the previous pay, tax, or tax code on your payroll software, only update student loan details (if applicable).”
Agent Update: issue 96
Tell HMRC about a new employee
Late P45 and student loans
So now the only useful information on a late P45 is the continue student loan tick box, but even that is sub-standard in not providing any detail of which student loan plan type is currently to be continued if marked, and then also requires the employee to answer the student loan questions 9 and 10 on the starter checklist as an aid to identifying the correct plan. Else the employer is obliged to operate Plan Type 1.
Opinion
A significant number of new employees do not present the P45 form to their new employer, and many employers are not even asking for one or even the starter checklist. The HMRC guidance has been open to wide interpretation and misunderstanding.
The starter checklist declaration is required even if a P45 is provided, with declaration B being made, HMRC will assume a secondary employment and are likely to issue a BR cumulative tax code.
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