HMRC Gives in to Employer Demand for P45

Employers have been instrumental in ensuring the continued use of P45 for job leavers.

A consultation of representative employment groups overwhelmingly rejected HMRC proposals to replace the traditional employment tax form with a leaver statement.

As things stand, a p45 is issued by an employer once an employee stops working at the company, recording pay and taxes of that individual since the start of that particular financial year.

Stephen Banyard, acting director general for personal tax, said: ‘We have been working closely with employers and stakeholders about the introduction of RTI. Employers told us to keep the P45 – which is exactly what we have done.’

Employer groups were adamant the p45 should remain and HMRC subsequently listened to the demand and have no plans to introduce the leaver statement. HMRC will however, continue plans to bring a Real Time Information (RTI) system into effect.

Chairman of the Chartered Institute of Taxation’s employment taxes sub-committee Colin Ben-Nathan, said: ‘This is a sensible decision by HMRC. The removal of the requirement to provide a P45 was well-intentioned but doing so this year would have been premature and potentially confusing for employers, employees and even government itself.’

RTI – which enables employers and pension providers to produce up-to-date information to HMRC, when or before payments are made, rather than waiting until the end of the tax year, which is what currently occurs – will nonetheless start to be introduced from April 2012, with 300 employers agreeing to trial-test the new system.

Ben-Nathan added: ‘We are pleased that HMRC consulted on this issue, listened to concerns and have come to a pragmatic solution that is all the better for having consulted. Once RTI is up and running this issue could be revisited.’