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 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 - 23 below. The guide is presented as follows

Enquiries from employersStep 1
Election made where employer acquires a businessSteps 2 - 6
Election made by employer not acquiring a businessSteps 7 - 15
Election made for improper purposeSteps 16 - 17
Cancellation of an electionSteps 18 - 20
Separate Scheme election has not come into effectSteps 21 - 22
ContractorsStep 23


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.

E nquiries from employers

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

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

  1. 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
  1. Otherwise, use Function EMPLOYER SET UP to open a new employer record(s). See Action Guide ‘P Scheme’ in this section for further guidance

  2. 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
  1. BF to await a reply. On receipt of the required details, for each separate scheme follow the guidance at PAYE30025

  2. 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

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

  1. Consider whether the election is valid, in particular whether
  • It was made on time
  • For elections made prior to 6 April 2004 the separate scheme will take effect from the tax year following the election
  • For elections made after 6 April 2004 the election can be made any time before the beginning of the tax year that the separate scheme will take effect

Or

  • It is made to affect the segmentation count and whether this will avoid the need to file annual returns using online filing or take advantage of any incentives. In these circumstances go to step 16

If you are unsure of the validity of the election you will need to refer this to an Inspector for guidance

  1. Otherwise, use Function EMPLOYER SET UP to set up a new employer record

  2. The day after using Function EMPLOYER SET UP
  • Use Function AMEND EMPLOYER SCHEME HISTORY to set the dormant indicator

Note: This will automatically set the Review Year to CY+4

  1. Write to the employer to acknowledge receipt of the election and advise them
  • That a new employer record has been opened
  • The employer reference allocated to the new employer record
  • That we will contact them at the appropriate 6 April for 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
  1. 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

  1. At BF date

  • 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 15. Otherwise go to step 13
  1. 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
  1. BF your papers to await the required information

  2. On receipt of the required list follow the guidance at PAYE30025

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. On receipt of an election in these circumstances you should


  1. Consider if the election is for an improper purpose

  • If you are unsure you will need to refer this to an Inspector for guidance
  1. Write to the employer

  • Stating that it appears that the election is made wholly or mainly for an improper purpose
  • Enclose an appeal form 64-7

Note: The employer has the right to appeal within 30 days of your notice

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
  1. 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
  1. BF to the following 5 April

  2. At BF date follow the Action Guide at PAYE21016

Separate Scheme election has not come into effect

  1. Follow the Action Guide at PAYE21031

  2. 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

Contractors

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

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