P45 Problem

[SERC1204]

Good evening

An employee left early in April. Due to an error on the part of our payroll provider, they were processed as a leaver in the March payroll (being paid up to their April leaving date - basically, full March pay plus a bit for April), their P45 was issued as month 12 and dated early April. They have given the P45 to the new employer, who as processed it as a P45 issued in April/month 1 - as a result, from HMRC’s perspective it looks like they have earned their entire annual salary in April and not paid enough tax and HMRC have issued them a K code, stinging them for tax.

How do we resolve this? The ex-employee has said HMRC have told them they need a new P45 for their (zero) earnings in April, our payroll provider has said it’s not possible to re-issue a P45 and the new employer shouldn’t have used the P45 (using a new starter checklist instead) and that the new employer should carry out an amendment to their FPS.

TYIA

 

[WaveJumper]

Hopefully someone will come along with a lot more knowledge than myself in the meantime we may wish to check out the link
https://www.gov.uk/employee-leaving

 

[MyAccountantOnline]

Good evening

An employee left early in April. Due to an error on the part of our payroll provider, they were processed as a leaver in the March payroll (being paid up to their April leaving date - basically, full March pay plus a bit for April), their P45 was issued as month 12 and dated early April. They have given the P45 to the new employer, who as processed it as a P45 issued in April/month 1 - as a result, from HMRC’s perspective it looks like they have earned their entire annual salary in April and not paid enough tax and HMRC have issued them a K code, stinging them for tax.

How do we resolve this? The ex-employee has said HMRC have told them they need a new P45 for their (zero) earnings in April, our payroll provider has said it’s not possible to re-issue a P45 and the new employer shouldn’t have used the P45 (using a new starter checklist instead) and that the new employer should carry out an amendment to their FPS.

TYIA

If I've interpreted this correctly what you are saying is that the P45 you issued was correct, but the new employer used a P45 for the previous tax year in error, in that case it's something the new employer needs to correct, not you.

 

[NicoJ]

Your payroll provider is correct, the employee needs to take it up with their new employer.

 

[Newchodge]

What date did the employee leave? Early April is the problem as the tax year changes on 6 April.

 

[Spur Support Services]

Assuming the P45 was processed correctly (all payments to employee made prior to 6 April), then one option is for the Employee to set up an HMRC personal Government Gateway account and ensure that the Pay details for 2020/21 being used for their coding are correct.
This can be done online, but can take a number of weeks to be processed, perhaps longer due to Covid19 delays.
The employee could also try calling HMRC or using their Webchat, but the Government Gateway route will be far less stressful.

Tax coding is an area which HMRC's real time information system has struggled with over the past few years, especially around leavers and it sounds as if not all the knots have been resolved.

If there is a known problem with the coding, which is causing hardship, the new employer could consider giving a staff loan, which could be recouped once the tax coding correction generates a tax repayment..

 

[IanSuth]

Assuming the P45 was processed correctly (all payments to employee made prior to 6 April), then one option is for the Employee to set up an HMRC personal Government Gateway account and ensure that the Pay details for 2020/21 being used for their coding are correct.
This can be done online, but can take a number of weeks to be processed, perhaps longer due to Covid19 delays.
The employee could also try calling HMRC or using their Webchat, but the Government Gateway route will be far less stressful.

Tax coding is an area which HMRC's real time information system has struggled with over the past few years, especially around leavers and it sounds as if not all the knots have been resolved.

If there is a known problem with the coding, which is causing hardship, the new employer could consider giving a staff loan, which could be recouped once the tax coding correction generates a tax repayment..

Be careful / v.careful with the webchat advice from HMRC, i had a coding issue (they sent me a cheque refund i knew i wasnt due and i needed it all sorted for student finance form filling reasons) and they were trying to get me to get payroll to run a prior year adjustment "to sort things" the software refused, the software provider said what was being requested was dubious at best and when i finally got a speak to a semi retired guy who was helping outon the helpdesk seeing out his last few months, he said I had basically been given a fudge workaround that might have caused me issues for years to come and he sorted the whole thing in 15 minutes whilst bemoaning the poor training of all the newer staff in the organisation. And i had been with the same organisation for over 20 years, all we had done was change software

 

[SERC1204]

Hi

Thank you for all of the replies.

Just to clarify on a few points...

The employee left on 7th April, but their final pay up to/inc. 7th April was paid in their March salary (afore mentioned error) and they were processed as a leaver in March (and P45 issued). They started there new employer late April (so new tax year) and the new employer used the P45 in the new tax year - it would seem they used the employee leave date on the P45 instead of month 12 from section 7.

I was actually able to get though to HMRC (with not too much of a wait!) and they confirmed that the new employer should make a correction.

Thanks again.

 

[Newchodge]

Hi

Thank you for all of the replies.

Just to clarify on a few points...

The employee left on 7th April, but their final pay up to/inc. 7th April was paid in their March salary (afore mentioned error) and they were processed as a leaver in March (and P45 issued). They started there new employer late April (so new tax year) and the new employer used the P45 in the new tax year - it would seem they used the employee leave date on the P45 instead of month 12 from section 7.

I was actually able to get though to HMRC (with not too much of a wait!) and they confirmed that the new employer should make a correction.

Thanks again.

Technically you should have issued a P60 om 5 April, as they were still employed, and a P45 on 7 April when they left, showing zero income. As long as the P45 showed 2020-21 tax year and Month 12, the new employer should not have used it.

 

[SERC1204]

Hi

The P60 was issued and having investigated further it seems the new employer did use the new starter checklist after all, not the P45. Our payroll provider has submitted the P45 for 2020/21, but HMRC have applied the earnings to personal tax account in month 2021/22!

 

[Newchodge]

Hi

The P60 was issued and having investigated further it seems the new employer did use the new starter checklist after all, not the P45. Our payroll provider has submitted the P45 for 2020/21, but HMRC have applied the earnings to personal tax account in month 2021/22!

HMRC don't receive P45's. Your payroll provider may have messed up in more than one way.

 

[Newchodge]

Payroll software would not normally issue a P60 for someone who had already been processed as a leaver, so it looks as if the leaving process was not completed until after 5 April.