PAYE21055 - employer records: maintain employer record: dormant employer records

This subject is presented as follows

Making an employer record dormant

Dormant notification

Effect of setting dormant indicator

Employer no longer dormant

Review of dormant employer records

Making an employer record dormant

You must only consider making an employer record dormant when you have confirmation that a limited company is currently

• Inactive

And / or

• Is not expected to

And / or

The dormant indicator is only appropriate where the scheme type is ‘P’ (refer to PAYE20135) and the employer is a limited company.

Dormant status is recorded on the computer by setting the dormant indicator on the employer record using Function AMEND EMPLOYER SCHEME HISTORY.

Note: This is the only function that can be used to set or remove this indicator.

An employer record

• Must not be made dormant on the same day as it is created

Dormant notification

You may be advised that a limited company employer is dormant in a number of ways

• Debt Management & Banking (DMB) advice
• Agent or employer direct contact
• Memo from another section within your office or department
• Form P225(T)

Effect of setting dormant indicator

As a result of setting the dormant indicator the employer record remains open but the accounts years selected are effectively cleared.

Therefore

• No forms P35 are issued
• No PAYE literature (including employer pack) will be sent
• Taxpayer records attached to the dormant employer record will be automatically cleared ‘N’ at each year end
• Banking Operations will allocate any payments received to OAS

Employer no longer dormant

An employer record will remain dormant until

• The employer has resumed paying earnings to employees that are liable to tax and / or NIC, or provide benefits to employees that are liable to Class 1A NIC. You will then remove the dormant status by entering an ‘Active From Year’ in Function AMEND EMPLOYER SCHEME HISTORY

Or

• You have been advised or have evidence that there is no likelihood that the employer will restart activities. You will then cease the employer record. PAYE21025 gives further details

Review of dormant employer records

When entering the Dormant indicator the review year must be set to CY+2, unless in exceptional circumstances you have information to confirm that the period of dormancy is more or less than this.

When the review year is reached you must establish whether the dormant indicator should remain on the employer record or if the employer record can be ceased.

To enable you to make a review of these cases a computer list is produced annually during October / November. This shows the cases where the dormant period is due to expire at the following 5 April.

For example a list produced in November 2005 will show employer records where the Dormant indicator is set to Review Year 2006.

The list shows

• All cases where the Dormant indicator is set for the Review Year
• The Review Year set - for example ‘Review Year 2006’
• Employer reference and employer name
• Space for review notes, reminding action and so on

At the same time a form P225(T) is automatically issued to all companies where the dormant indicator is due to expire. If the correspondence address held on the employer record is noted as RLS, the form P225(T) will be forwarded to the responsible office to investigate and obtain a new address.

The form asks the company to supply the following details

• Whether it has directors or employees liable to PAYE and / or NIC deductions
• The date when trading is likely to start
• The future intentions of the business

The completed forms are returned to the appropriate Processing Office, to be actioned in conjunction with the review list.

The purpose of the review is to establish whether

• The Dormant indicator is or is not to be reapplied to the employer record

Or

• A cessation date can be entered onto the employer record

This review must be completed by the end of March.

Note: When the Dormant indicator is not reset on the employer record the computer will automatically remove the indicator at the following 6 April.