Blog Search

Archives

Business mergers and changes of ownership – payroll issues explained

In the December 2019 issue of Employer Bulletin, HMRC set out the action required to avoid any problems when merging or changing ownership of a business, to ensure all employees’ payroll details are transferred to the new business.

When a business merges or changes ownership, employers have to contact HMRC to confirm if the business change should be treated as a merger or a succession. This affects whether the business can continue to use its current employer reference or needs to apply for a new one.

HMRC have identified that in a small number of cases, after an employee has moved to a new employer reference because of a business change, previous pay and tax details are sometimes incomplete on the new payroll record. As a result, new tax codes are issued based on incorrect information which can cause financial difficulties for employees until their records are corrected.

Where a business s is merging or changing ownership the following steps should be followed to ensure all of the employees’ payroll details are transferred to the new business.

If HMRC provides a new employer reference or the employee is moving to a new payroll within the organisation with a different employer reference, the employer should send a Full Payment Submission (FPS) with leaving details, including the year to date pay and tax figures for the employer reference the employee is moving from. The employee does not need to be given a P45, but the employer must provide them with the pay and tax details up to the date they moved to the new employer reference.

Once the leaver FPS has been successfully sent to HMRC, the employer can send the first FPS for the new employer reference. Employment is restarted for each employee affected by returning their year to date figures to zero and include the employee information. Record the start date for the new payroll, indicating on the starter declaration, C for BR codes or codes starting with a D prefix and B for any other code.

When operating the new payroll, calculate and deduct PAYE and NICs from any payments you make to the transferred employee from the date they moved payrolls. If using a cumulative tax code use the pay and tax details from the old employer reference.

The last FPS from the old employer reference must be submitted before the first FPS for the new employer reference.

If the employee moves to a new payroll under the same employer reference, the employer continues to operate PAYE and reports payroll information under the same employer reference.

  • Latest news and testimonials

  • Latest News

    • September Q&A
      Q. I have two small businesses which are treated as a group for VAT purposes, so we only submit a single VAT return covering both …
      Read more
    • Making Tax Digital for Business: update
      In July, the Government confirmed that the Summer Finance Bill would be published in September, with the measures dropped from the pre-election Finance Bill being reintroduced …
      Read more
  • Testimonials

    • Partner – Solicitor
      I have worked with SBL over the last 10 years on numerous matters involving owner-managed business. They are professional, personable, knowledgeable and work incredibly hard to provide the best advice to their clients. I would have no hesitation in recommending SBL.
      Read more
    • Director – Networking Company
      SBL are a professional Accountancy Firm and are exceptionally up to date with all legislations.  SBL know their clients extremely well and what will work best for their business. SBL understands business and how business works and they deliver the very best considered professional advice.
      Read more
    • Director – Retail/Fashion Company
      SBL have provided auditing and other accounting services for our company for more than 10 years. They not only offered excellent support from a professional accountant company, but also delivered forward-thinking advice on how to improve our business.
      Read more
  • Don’t hesitate to ask

    SBL are here to help. With accountancy advice and tax planning experts on hand to guide you and your business on the pathway to success! You can call us on 020 7580 6822, or email us on info@sblaccoutants.com or if you’d prefer you can complete our Free Online Enquiry Form and one of the team will be in touch shortly.

    Don’t hesitate to ask

    Don’t hesitate to ask section
    • This field is for validation purposes and should be left unchanged.

    By submitting my details on this form, I consent to being contacted by a member of the SBL Accountants team by email or telephone. Privacy Policy