Payroll: what to do if your business merges or changes
Date Published: August 20th, 2019

What to do with your payroll and PAYE reference numbers if your business changes?

Find out what to do with your payroll and PAYE reference numbers if your business changes but does not cease to trade.

Difference between Mergers & Succession 

There is a major difference between merger & succession. Merger combines the 2 or more PAYE schemes for a same legal entity. It is not necessary that every time a PAYE scheme merges whenever two businesses merge.

Succession is the transfer of business ownership from one legal entity to another. In such case, new owner will take the responsibility of the pay records.

In order to confirm whether it’s a merger or a succession, you need to contact HMRC helpline number.

HMRC will tell you which employer reference you need to choose or they may supply you with a new one. 

Changes to Payroll where a new reference is required

In case HMRC tells you to change or use a new reference, firstly you must –

  • Transfer the payroll records to the new employer reference.
  • Send in a full payment submission (FPS) under the old employer reference along with the leaving details and must include the year to date pay & tax figures.

There is no need to file form P45 for each employee affected by the change. However, you need to provide details regarding total pay & deductions made to the employee account up to the date when the scheme changed.

Then, you need to send another full payment submission (FPS) under the new employer reference from the starting day of the new payroll & must include –

  • Starting date for the new payroll
  • Starting details of each employee
  • Starter declaration B for any other code.
  • Starter declaration C for BR code or codes starting with a D prefix.

Note – You must submit full payment submission (FPS) before the first FPS of the new employer is submitted. If you are unable to do the same, kindly contact HMRC employer helpline for the same.

At the time of making payroll, you must –

  • Calculate & deduct PAYE tax & national insurance contributions from any payments made to the transferred employees from the date when the scheme is changed.

In case you are operating a cumulative tax code, use the pay & tax details from the old employee reference.

Moving Employee from one Payroll to another 

In case where not all but some of your employees transfer from one employer payroll to another payroll in your organization, take the following steps below –

Employee moving to a new payroll under the same employer reference

Continue to operate PAYE and report payroll information to HMRC under the same employer reference.

Employee moving to a new payroll under a different employer reference

  1. Transfer the payroll records to the new employer reference.
  2. Send in a full payment submission (FPS) under the old employer reference along with leaving details and must include the year to date pay & tax figures.
  3. Send another full payment submission (FPS) under the new employer reference from the starting day of the new payroll & must include –
    • Starting date for the new payroll
    • Starter declaration B for any other code.
    • Starter declaration C for BR code or codes starting with a D prefix.
  4. At the time of making payroll, you must –
    • Calculate & deduct PAYE tax & national insurance contributions from any payments made to the transferred employees from the date when the scheme is changed.
    • In case you are operating a cumulative tax code, use the pay & tax details from the old employee reference.

Submitting Forms P11d in case your Business has experienced a Paye Scheme merger, succession or Part Scheme Transfer

Submission of P11D form depends upon the type of change your business has undergone –

Merger

In case your organization has undergone a PAYE scheme merger & employees of your company receive company benefits, you need to file 2 P11D forms for each employee –

  • One under the original PAYE reference up to the period of merger date.
  • One under the new PAYE reference from the date of merging.

Note – You need to submit only one P11D form in case your business has undergone a merger and employees are still employed under the original PAYE scheme.

Succession

If you contact HMRC and tell them that your business has undergone a change in the form of succession, you must submit one P11D form for each employee under the new Payee scheme in receipt of company benefits. It must contain the total information to be reported for both PAYE scheme references.

In case you didn’t contacted HMRC for advice related to business succession & your employees continue to receive company benefits, you need to file 2 P11D forms for each employee –

  • One under the original PAYE reference up to the period of succession date.
  • One under the new PAYE reference from the date of succession.

Part Scheme Transfer

In case your business has undergone a part scheme transfer & employees of your company receiving company benefits continuously, you need to file 2 P11D forms for each employee –

  • One under the original PAYE reference up to the period of transfer date.
  • One under the new PAYE reference from the date of transfer

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