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Advice from Simon Parsons

New Job, New tax year, Old P45!

There’s some confusion about what action needs to be taken with the application of a new starter’s P45 (sent from their former employer) when it’s over three months old. The introduction of the new A4 format of the P45 will be sure to raise further confusion. In this article, we’ll take a look at what can be accepted and used, and more importantly, what tax code should be applied.

With the introduction of eMandation, new validations are being applied by HM Revenue & Customs (HMRC) on the issuing of the P45 to leavers and the dates that can be reported on the new starter P45 via Electronic Exchange. HMRC will no longer accept a P45 part 3 (the new starter P45) if it is more than 6 years prior to the date of the submission. Equally HMRC will no longer accept electronically if the date of starting or leaving is more than 30 days into the future.

Q: Can an employer accept an old A5 format P45?

A: Employers have been able to use the new A4 format of P45 since October 2008, but equally, they have also been able to continue to use the old A5 format P45 (which continues officially until 5th April 2009). Some employers may have either not understood or obtained new supplies of the A4 P45 and are continuing to issue old format. HMRC is asking that employers continue to accept the former format P45 into the new tax year.

Q: If I receive a P45 which is more than 6 years old what should I do?

Q: What if the date of leaving is more than 30 days into the future?

A: Ask the employee to complete a P46 and do not use the P45 until the date of leaving is within 30 days.

Q: Can I apply a P45 in the current tax year that is over 3 months old?

A: Yes, although it is important to look at the timing rules. There is no HMRC rule that a P45 over 3 months cannot be used or some special operation should apply (such as using BR Week 1 / Month 1 or cumulative), this is a myth that sometimes circulates around payroll practitioners. P45s are good for 6 years (to a certain extent).

When receiving a P45 from a new employee, the important thing is to check which tax year the P45 relates. HMRC suggest that the date to check is the date of leaving (which may not match the tax year of the last payment on the P45).

If the date of leaving on the P45 is from the 6th April 2009 through to 5th April 2010, then use the tax code stated on the P45.

Remember, special care is needed because of the emergency budget which occurred in 2008.

If the stated date of leaving is between 7th September 2008 and 5th April 2009 and the employee starts working for you criduring the period 6th April 2009 and 24th May 2009, use the tax code on the P45 but add 44 to any code that ends with the L suffix. Do not carry over any week 1 / month 1 tax basis.

If the date of leaving is between 6th April 2008 and 6th September 2008 and the employee starts working for you during the period 6th April 2009 and 24th May 2009, use the tax code on the P45 but add 104 to any code ending with the L suffix, do not carry forward any week 1 / month 1 tax basis.

If the date of leaving is between 6th April 2008 and 5th April 2009 and the employee starts working for you after 25th May 2009, use the emergency tax code 647L on a week 1 / month 1 basis . Do the same if the P45 is dated before 6th April 2008 (but the P45 is no more than 6 years old).

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