Employers should take action as set out in the Employer’s Help Cards (CWG1) (issued annually as part of the employer’s pack), following the P45/P46 procedures, as appropriate, for employees commencing and leaving during the year.
In any employer compliance review, it may be expected that the employer’s compliance with the P46 procedures will be examined closely, and it should be noted in this respect that the onus of ensuring that the employee’s name and address is not fictitious is placed on the employer. It should also be noted that obtaining a form P46 retrospectively will not absolve the employer from his responsibility to account for the tax which ought to have been deducted in the absence of a correctly completed form P46.
In such circumstances, the employer will be called on to pay basic rate tax on the gross amount of the earnings paid to the employee concerned. If the payments to the employee were also above the Class 1 NIC threshold, the employer will also have to account for the NIC which ought to have been paid. If the employer had agreed to make net (or ‘free of tax’) payments to the employee, the tax and NICs will be calculated on the amount paid, grossed up to take account of the employer having paid the tax on the employee’s behalf.
The employer should remit to the collector any tax/NIC due within 14 days of the end of each income tax month.
As a result of the Carter Review, regulations have now been introduced to require that, as in the case of end of year returns, all PAYE filing during the course of the tax year is made online by medium-sized and large companies from 6 April 2009. Further regulations covering small employers will be introduced later. The regulations are contained in Income Tax (Pay As You Earn) (Amendment No. 4) Regulations 2007 (SI 2007/2969), which amend Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682). They extend the requirement that electronic communications must be used for the delivery of information. Employers who are already required to file form P35 or P14 electronically are now also required, by these Regulations, to use electronic communications to file form P45 Part 1, form P45 Part 3, form P46 and form P46(Pen). These Regulations also provide for penalties if electronic communications are not used for the delivery of these forms.
These Regulations also make amendments relating to the contents of form P45 Part 1 and Part 3 and to form P46 procedures for new employees: matters that are dealt with in Chapter 2 of Part 3 of the PAYE Regulations (new employees (other than pensioners): forms P45 and P46); and to the forms and procedures for new pensioners: matters that are dealt with in Chapter 3 of Part 3 of the PAYE Regulations (new pensioners: forms P45 and P46).
These Regulations also make minor amendments to reg. 186 of the PAYE Regulations (recovery: adjustment of employee’s code) and to reg. 213 of those Regulations (how information may be delivered).
Various returns have to be completed by the employer at the end of the tax year and sent to the PAYE tax office. He must also complete and sign a declaration and certify that all the particulars required to be entered on the end of year returns are in every respect fully and truly stated to the best of his knowledge and belief.
All employers, whatever their size, are required to file PAYE end of year returns online. There are penalties for failing to do so.