How is Form P45 Completed for a Leaver?

Every employee who leaves, including those who say they are not going to work again, must be issued with a P45, except:

• students who leave during the year and a valid P38(S) is in force
• employees who are retiring from their employment and will be receiving a pension from the same employer (see penultimate paragraph below)

From 6 April 2011, all employers (other than a few who are exempt) must file Part 1 of the P45 online.  If the employer is required by law to file Part 1 online, the procedures differ according to the method used:

• If the form is filed online, using the facilities available on HMRC’s Website, the existing database entry for the employee must first be updated online with the necessary leaver details.  When the database entry is ready, the Part 1 details can then be sent online
• If the form is filed using the facilities provided by a computerised payroll system, all of the leaver details are entered and the Part 1 details can then be filed online.

After the Part 1 details have been filed and accepted by HMRC, a three-part, A4-size version of form P45 (comprising Parts 1A, 2 and 3) is completed by hand or printed, depending on the facilities available.

If, however, a paper Part 1 is to be completed and sent to the employer’s tax office, a four-part version of a pre-printed A4 form P45 must be completed, by hand or printed, depending on the facilities available.  The following procedures should be followed.  This information will also be of help to employers filing Part 1 online as it explains what is happening unseen when using computerised procedures:

Before sending Part 1 to the tax office, the numbered items must be completed in capital letters and without errors, as follows:

1. the employer’s PAYE reference number
2. the employee’s NI number, if known
3. the employee’s title, surname and forename(s)
4. the leaving date, i.e. the date on which the employment ended, not necessarily the last working day
5. a “Y” if the employer was liable to make Student Loan deductions (even if none were actually made due to the employee’s earnings levels)
6. the tax code used for the final payment made to the employee, including any prefix or suffix, followed by an “X” if the code was applied on a Week 1/Month 1 basis
7. if the tax code was cumulative, i.e. no “X” was entered at item 6:
• the week or month number of the final payment
• the total pay to date, including earnings in any previous employment
• the total tax to date, including tax deducted in a previous employment
8. if the tax code was not cumulative, i.e. an “X” was entered at item 6, or  the total pay and tax in this employment differ from the figures at item 7:
• the total pay to date in the current employment only
• the total tax to date in the current employment only
9. the employee’s unique employment or payroll number and the employee’s department or branch
10. the employee’s gender (mandatory)
11. the employee’s actual date of birth (mandatory)
12. the employee’s private home address and postcode
13. the employer’s name, address and postcode, certifying the details as correct, and the date on which the form was completed.
14. only completed if the employee has died (see below).

If using a pre-printed carbonated form, the details at items 1 to 7 should now appear on all parts of the P45.  Items 8 to 13 also appear on Part 1A.

Part 1 is sent to the tax office or filed online on the day the employee leaves, or, in the case of a mid-month leaver, on the day the payslip is issued at the end of that month.  Parts 1A, 2 and 3 are given to the employee, with instructions to retain Part 1A before handing Parts 2 and 3 to the next employer.  Once issued, a P45 may not be amended and a duplicate must never be issued.  If necessary, a letter may be issued showing the same details.

If the employee has died, a “D” is entered inbox14and all four parts of the P45 are sent to the tax office.  If any earnings are paid subsequently to the personal representative of the deceased, tax code 0T must be used on a Week 1/Month 1 basis.  No NICs are deducted from any payments made after the employee’s death.

If an employee is leaving employment, but will continue to be paid by the employer as a pensioner, form P46(Pen) is completed instead of form P45.  It must be filed online if the employer is required by law to do so; otherwise the paper version of the form is completed.  The form must be sent to the tax office or filed online within 14 days of retirement, and a copy given to the employee.  The employee’s tax code, on a Week 1/Month 1 basis, is used until otherwise notified by the tax office.

Certificates of election for married women (CA4139/CF383 or CF380A) and certificates of age exception (CA4140/CF384) are returned to the individuals concerned when they leave.  However, certificates of deferment (CA2700) must be retained by the employer.