During the life of a business there are occasions when it is necessary to move employees from one payroll to another. Such a move might be because the business has changed ownership, changed its legal status or for administrative purposes.
HMRC classifies changes to PAYE schemes as either mergers or successions. For payroll purposes, a merger is the bringing together of two or more PAYE schemes within a business (which may or may not be the result of an actual business merger). A succession arises when the business ownership changes and the new owner is taking on the pay records.
An employer looking to make changes to their payroll scheme should first contact HMRC’s Employer Helpline. The helpline will confirm whether the change is a merger or succession before advising which PAYE reference number to use if there is more than one, or issuing a new reference number.
Moving to a new PAYE reference number
HMRC highlighted in December’s Employer Bulletin that when a new PAYE reference number is issued – or an employee is moved between payrolls - the new payroll record does not always contain all the details of previous pay and tax information that it should have for any staff transferred. This can cause problems for employees whose records have been moved as they may then be issued with new, incorrect tax codes based on partial information.
To avoid such issues occurring, HMRC are asking any employers who are moving staff to a new payroll to ensure that they have submitted the FPS for the old PAYE scheme before they send the first FPS of the new scheme.
The FPS for the old scheme should contain all the leaving details of employees who are being moved to the new payroll scheme. All relevant details for the employee should then be transferred to the new scheme. If, for some reason, it is not possible to submit details from the old scheme before the new scheme is processed, employers are advised to contact HMRC’s Employer Helpline.
Where the employee receives benefits which need to be reported on a P11D and they have been moved between PAYE schemes during the year, then a P11D should be prepared using the new reference only, but contain details of all the benefits provided under both the old and new references.
More guidance on moving employees between payrolls can be found on GOV.UK.