Changing or Moving Employees between PAYE ref/Companies

On occasions there is a need to 'close' one PAYE reference and start a new one with the same employees - this is sometimes because of acquisitions or takeovers, or possibly because businesses are being split and sold off. Regardless, there are two ways of handling this:

• Merge the employee benefits into one company and only supply one P11D per employee (recommended)
• Issue two P11Ds per employee, one for the old PAYE reference and one for the new one

There are different pros and cons with each of these approaches, and you would need to select the one that is best not only for your employees, but for the business.

It is important to remember that a P11D return serves two purposes:

1. Tell an employee about benefits received and how it will affect their personal tax
2. Tell HMRC about the Class 1A that is due for the business

Merging Benefits

This is the recommended way of achieving things if your focus is the employee experience, and it also complies with HMRC's guidance on the matter, which states: 

"If the employee received or continues to receive company benefits following a change of payroll, you must submit forms P11D/P11D(b) under the new employer reference. Send a P11D for each employee in receipt of a company benefit and the P11D/P11D(b) must contain the total information from both the old and new employer references.

If the employee moves to a new payroll under the same employer reference, you should; Submit one P11D for each employee in receipt of company benefits under the same employer reference."

*HMRC Employer's Bulletin December 2019 

It will likely confuse employees to receive two separate P11Ds (quite possibly from the same email address) - they will have to add any figures to get to a single number that is reported to HMRC, and it will make completing a tax return (if they do one) more complex. Possible outcomes are that if the employee has a company car, they will see the car being withdrawn and then re-allocated the next day, equally they will see medical split on a prorated basis etc.

The P11D Organiser will allow you to move all employees, along with all their benefits, from the 'old employer' to the 'new employer', and then create a single P11D for the employee, with all the benefits attached to the newest employer.

The correct amount of Class 1A will be reported to HMRC, and they will get the right payment, however you will need to work out any cross charging of Class 1A within the business(es).

This method ensures the 'year to year' chain of the employee record is maintained, and in general, this is the preferred option - ideally employees come first.

Two P11Ds per Employee

The other option, most often employed when a business has been split of and is not part of the same group, is to give each employee two P11Ds, one for each company. Some see this as a cleaner way for the business and for Class 1A reporting but will probably cause more confusion for the employee. It also creates more work for you and will have an effect on your P11D Organiser licence fee, as you will be submitting twice the number of P11Ds for that year.

In this scenario the process would be to end the employee's employment (and benefits) with the old company on the last day of operation, and then start them as a new employee (along with their benefits) in the new business the next day - however, you are effectively creating a duplicate employer.

There is no function in the P11D Organiser to duplicate an employer, so this would be a manual operation that will usually entail the following processes:

1. Perform a backup of your system!
2. Export a spreadsheet of all active employees
3. Edit the spreadsheet to add a DOL (Date of Leaving) for all employees
4. Import that modified spreadsheet to the old employer to update the employee records
5. Run the 'Align Benefits' routine to end all benefits on the DOL (depending on benefit treatment)
6. Export all the benefits assigned to separate spreadsheets
7. Create the new company
8. Modify the employee spreadsheet to add in a DOC (Date of Commencement) for the next day and remove the DOL
9. Import the employees into the new company
10. Update the benefit spreadsheets to give the benefits the correct start date
11. Import all the benefits into the new employer and check their treatment
12. Remember at year end to perform two submissions and email two sets of P11Ds (or benefits statements) to employees

This method obviously separates the year-to-year continuity of the employment record - both companies are maintained and auditable, simply not linked.

Support

Although we generally advise first option, if you decide to proceed with the second of these options (two P11Ds per employee) we would suggest you contact the support desk first to discuss the implications more fully. If you want assistance with the process, our support team can offer this at our standard rates, and we can provide a quote at the time.