HMRC backtracks on plan to abolish P45s

Accountants may be interested to learn that P45 forms are to remain with us even when HMRC changes to Real Time Information.

Under the Revenue’s original plans, P45s were to be replaced with a leaver statement when employers start submitting details of salary deductions electronically. However, HMRC has had a change of heart after employers said they wanted to keep the P45.

Employers will continue to issue P45s as normal to employees when they leave a company. The new employer will then submit the information on the form to the Revenue along with their normal Real Time Information submission.

Last November, the CIOT sent a letter to HMRC asking it to hold back any changes to existing rules until RTI had a chance to bed in. Colin Ben-Nathan from the Institute said the Revenue had now made a sensible decision that should reduce some of the confusion and disruption that will arise when RTI is introduced.

Removing the requirement for employers to provide a P45 may well have been made with the best intentions but it was potentially confusing for employees, employers and possibly even the government. Furthermore, the introduction of a new document, without adequate explanations and training manuals, could increase the administrative burden on employers; the direct opposite of the government’s desire to reduce bureaucracy.

P45s have been with us since the end of World War II and record the pay and income tax deducted from an employee who leaves his employment during the course of a tax year.

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