The P46 Form
Many employers are continuing to fail to collect correct information for new starter employees and failing to understand their employer responsibilities. Equally many are failing to apply the correct tax code using what is sometimes referred to as local practices.
Home Office regulations require employer to satisfy themselves that their employees are entitled to work in the UK and record pertinent documents showing that entitlement (termed as a defence). Equally, new employees in most cases should present their new employer with a P45 form.
The P45 is a certificate providing details of their former employment. It normally has 4 parts and the employee would give their new employer Parts 2 and 3. The employee will also have been given a Part 1A which they are to retain, so if the P45 has part 1A still attached, this must be returned to the employee.
The validity of the P45 and how it is to be applied is explained in the HMRC guide E13, and in most cases the form determines the employee’s tax code. However, many employees may not have a P45 from their previous employer when they start working in a new job and often in the past, they and the new employer have never completed a P46 either.
The P46 – same game, new rules
The rules for the P46 form have changed and employers' HR and Payroll departments are now obliged in most cases to undertake certain actions, or else fear potential penalties and fines for non-compliance from HMRC. If a new employee does not have a P45, then in most cases a P46 must be completed. The P46 is the form used to tell HMRC of an employee who has been paid and does not have a P45.
The E13 states:
If a new employee is going to work for you for more than one week and does not have a P45:
- Ask your employee to contact their previous employer to get a P45 if they have worked in the UK in the current tax year.
- Ensure that Section one of form P46 is completed in time for your employee’s first payday.
Changes applied from April 2008 allow employers to use their own version of a P46 if they file in-year forms online through electronic exchange. This could even be collected from employees electronically.
Often, employers have neglected the completion of the form leaving the onus on the employee to obtain and submit. This is no longer permitted and the employer has responsibility for submitting as well and obtaining P46 information from their new employees.
With the onset of compulsory in-year filing and the onset of associated penalties and fines, it is essential that employers review their HR and Payroll processes to ensure that they are fulfilling their legal requirements and ensuring that employee either present their P45 or complete the P46. If the employee refuses to do either, then the employer is obliged to make the declaration on the employee’s behalf to the best of the employer's knowledge. This will generally mean ticking box C as a form P46 with no tick in either A, B, or C is allowed and will be rejected as incomplete.
Exceptionally, if your employee has not completed the form P46, or provided you with the information to fully complete Section one in time for the first pay day, you (the employer) must complete Section one to the best of your knowledge on their behalf and use code BR on a cumulative basis. You (the employer) must send in a P46 for all cases on the employee’s first pay day.”
Only if an employee is going to work for the employer for less than one week is there no need to complete a P46.
We've updated this article with more relevant information now that the P46 form has been replaced with the New Starter Checklist.