PAYE20026 - Employer records: set up employer record: election for separate schemes (Action Guide)

An employer may elect to have groups of employees dealt with under separate schemes (Word 24kb) for different parts of the payroll. This process is also known as scheme splitting. To deal with an election for scheme splitting, follow steps 1 - 21 below. The guide is presented as follows

Enquiries from employers Step 1
Election made where employer acquires a business Steps 2 - 6
Election made by employer not acquiring a business Steps 7 - 13
Election made for an improper purpose Steps 14 - 15
Cancellation of an election Steps 16 - 18
Separate Scheme election has not come into effect Steps 19 - 20
Contractors Step 21

For details of how to access any of the Employer Business Service functions use the [Index of Functions] button on the left of the screen.

Enquiries from employers

1. Send a form P350 to the employer if you receive an enquiry concerning separate schemes

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Election made where employer acquires a business

Where an employer acquires a business they may elect for one or more separate schemes. If this election is received within 90 days of the acquisition it will come into effect for the year in which the acquisition was made. On receipt of an election in these circumstances you should

2. Consider whether the election is valid, in particular whether it was made on time
 
  • If you are unsure of the validity of the election you will need to refer this for guidance
3. Otherwise, use Function EMPLOYER SET UP to open a new employer record(s). See Action Guide ‘P scheme’ in this section for further guidance
4. Write to the employer to acknowledge receipt of the election and advise the employer
 
  • That a new employer record(s) has been opened
 
  • The employer references allocated to the new record(s)
     
    And
 
  • Ask for a list of all employees to be moved to the new scheme(s). The list must show
 
    • Each employee’s full name
 
    • Each employee’s National Insurance Number
 
And
 
    • Indicate which of these employees are paid tax credits but PAYE deductions are not made
5. BF to await a reply. On receipt of the required details, for each separate scheme follow the guidance at PAYE30055 
6. Use Function AMEND EMPLOYER NOTES to ascertain whether any dispensation details are held on the existing employer record. If so
 
  • Use Function AMEND EMPLOYER NOTES to note these details on the new employer record

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Election made by employer not acquiring a business

The election must be made before the beginning of the tax year for which it is to have effect

7. Consider whether the election is valid, in particular whether
 
  • It was made on time
 
    • The election can be made any time before the beginning of the tax year that the separate scheme will take effect
 

If you are unsure of the validity of the election you will need to refer this to an Inspector for guidance
8. Write to the employer to acknowledge receipt of the election and
 
  • Advise them that a new employer record will be opened on 6April
 
  • Advise them you will notify them of the employer reference allocated to the new employer record at that time
 
  • Ask them to provide a list of all employees who are to be moved to the new employer record. The list must show
 
    • Each employee’s full name
 
    • Each employee’s National Insurance Number
 
And
 
    • Indicate which of these employees are paid tax credits but PAYE deductions are not made
9. BF to appropriate 6 April
 
  • If the list is received prior to the BF date keep it in the employer record pad until the appropriate 6 April
10. At BF date
 
  • Use Function EMPLOYER SET UP to set up a new employer record
 
  • Use Function AMEND EMPLOYER SCHEME HISTORY to enter CY date in ‘Active From Year’ field
 
  • If a list of employees to be moved to the new employer record is already held, go to step 13. Otherwise go to step 11
11. Write to employer
 
  • Refer to previous correspondence
 
  • Ask them to supply a list of all employees who are to be moved to the new employer record and remind them of the relevant details needed
12. BF your papers to await the required information
13. On receipt of the required list follow the guidance at PAYE30055 

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Election made for an improper purpose

An employer’s election may be disregarded if, within 60 days, a decision is made that the election has been made wholly or mainly for an improper purpose (Word 24kb). On receipt of an election in these circumstances you should

14. Consider if the election is for an improper purpose
 
  • If you are unsure you will need to refer this to a Higher Officer for guidance
15. Write to the employer
 
  • Stating that it appears that the election is made wholly or mainly for an improper purpose
  If the employer does not accept your decision, they have 30 days from the date you issue the decision letter within which to send you an appeal. Once they have appealed you may offer a review or the employer may request a review by HMRC. Alternatively they may appeal to the First-tier Tribunal. - see ‘Appeals Review and Tribunals guidance (ARTG) for more information about what to do if you receive an appeal.

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Cancellation of an election

You will normally receive a notice of cancellation on form P350. The notice of cancellation must be made either

  • Before the beginning of the tax year for which it is to have effect

Or

  • Where a separate scheme election has not yet come into effect the election may be cancelled at any time before the beginning of the tax year it is to have effect
16. On receipt of a cancellation notice, if the separate scheme election has not come into effect, go to step 20. Otherwise write to the employer and
 
  • Acknowledge receipt of the cancellation notice
 
  • Confirm the year the cancellation will take effect from
 
  • Confirm that the employer record will be closed from the following 5 April
17. BF to the following 5 April
18. At BF date follow the Action Guide at PAYE21016 

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Separate Scheme election has not come into effect

19. Follow the Action Guide at PAYE21031 
20. Write to employer
 
  • Acknowledge receipt of the cancellation notice
 
  • Confirm the cancellation will have immediate effect
 

Note: If the employer makes any further election for Separate Scheme(s) go back to step 1

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Contractors

21. When you receive an election from a contractor adapt these instructions to suit the circumstances

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