In this section:
- Starting the tax year: codes and forms
- Monthly/weekly payroll and form filling
- End-of-year tasks: annual return and form filling
- Non-standard paydays or moving paydays
- PAYE for special types of pay
- PAYE if your business closes or changesÂ
- Pension payments and PAYE
- PAYE problems, checks, penalties and appeals
PAYE if your business closes or changes
There are a number of potential changes to your business that have implications for your operation of PAYE. This guide sets out what you must do in some of the most important of these circumstances, such as ceasing to employ anyone, closing your business, or selling the business on to someone else.
On this page:
- PAYE if your business closes down
- If you no longer employ anyone and don't plan to do so again
- If you have stopped employing anyone but plan this to be temporary
- What to do if your business and its payroll changes hands
- Other changes to your business that have PAYE implications
- More useful links
PAYE if your business closes down
If you close down your business you must inform HM Revenue & Customs (HMRC) so that they can update their records. You must also pay HMRC any PAYE tax and National Insurance contributions (NICs) you owe within 14 days (17 days if you pay by electronic means) of the last tax month (or quarter if you pay quarterly) in which your business was still open.
You will also have to complete your end-of-year PAYE forms using information up to the date on which your business closes. To avoid any delays with finalising your affairs, HMRC recommends that you do this as soon as possible. The returns you must send are:
- your Employer Annual Return (P35 and P14s)
- your expenses and benefits returns (forms P11D, P11D(b) and P9D)
Almost all employers are now required to file their Employer Annual Return online. However, one of the exceptions to this requirement is employers with fewer than 50 employees who cease operating PAYE during 2009-10 and who file their return by 5 April 2010. If this applies to you, you are still permitted to send your 2009-10 annual return on paper. If you send your return on paper and it does not reach HMRC by 5 April 2010 you may receive a penalty.
More about filing your Employer Annual Return
Managing your other tax responsibilities when closing or selling your business
If you're closing or selling your business, it's important to make sure you let all the relevant parts of HMRC know. This will ensure you won't underpay or overpay any tax and will prevent HMRC from sending you demands or bills that you aren't liable for. In many circumstances, you will be able to claim tax relief against losses you have made and in some specific circumstances, you may be able to claim tax back. And if you have difficulty in paying what you owe, you may be able to make an arrangement with HMRC to pay over a longer period of time. You can read more about who to contact and what to do in the guide 'Closing or selling a business' - follow the link below.
More about completing your PAYE employer annual return
Read about how to make expenses and benefits returns
More about PAYE online filing, including deadlines and tax-free payments
If you no longer employ anyone and don't plan to do so again
If your business no longer employs anyone then you should contact HMRC. In many instances they will close down your PAYE scheme. However, if your business is a limited company, they will ask you for additional information before deciding how to proceed.
You must pay HMRC any PAYE tax and NICs that you owe within 14 days (17 days if you pay by electronic means) of the last tax month (or quarter if you pay quarterly) in which you still had employees. And you must also file your end of tax forms, as outlined in the section above.
If you have stopped employing anyone but plan this to be temporary
If you face a temporary gap in which you will owe no PAYE tax or NICs, then the steps you must take depend on the length of the gap.
There are numerous possible reasons for this kind of gap in PAYE liabilities - for example, seasonal businesses often employ no-one during the quiet months of the year.
Gaps of less than a year
If you expect that your gap in liabilities will be for less than a whole tax year, then your PAYE scheme will continue to operate. However, because HMRC expects regular payments from every operational PAYE scheme, you will have to inform them every time there is a payment period (month or quarter) for which you have no PAYE tax or NICs to pay.
You do this by making a 'nil declaration' in any of the following ways:
- The quickest way is to make your nil declaration online - follow the link below.
- To make the declaration by phone, you will need to tell HMRC your Accounts Office reference number and the month or quarter for which no payment is due. Contact HMRC on Tel 0845 366 7816 - lines are open from 8.00 am to 8.00 pm, Monday to Friday and 8.00 am to 4.00 pm on Saturdays.
- You can mark 'NIL DUE' on a PAYE payslip for the month or quarter - you should then sign this and send it to HMRC.
Make a PAYE nil declaration online
Gaps of a year or longer
If you don't intend to employ anyone for at least one whole tax year, you must contact HMRC. They will let you know whether or not they need to close down your PAYE scheme, or to mark it as dormant for the duration of the gap. You do not need to send HMRC nil payment declarations if they either close your scheme down or mark it dormant. When you start to employ someone again, you must let HMRC know straight away.
What to do if your business and its payroll changes hands
If your business is bought or otherwise transferred to a new owner, or if you take over another business there are steps you'll need to take to ensure that PAYE continues to operate correctly for the affected employees.
If you take over another business
If you take over another employer's business, then you also take on the responsibility for its employees and its payroll. You must take all of the following actions that apply to you:
- Work out and deduct PAYE tax and Class 1 NICs from any payments you make to the transferred employees from the date you became their employer.
- Pay HMRC any PAYE tax and Class 1 NICs you deduct within 14 days of the end of the tax month or quarter (17 days if you pay electronically).
- Record and pay any Class 1A NICs due on benefits in kind you give to transferred employees (these are due to reach HMRC by 19 July after the end of tax year, or by 22 July if you pay electronically).
- Pay any Class 1B NICs due under a PAYE Settlement that's been agreed for the tax year. Note that it doesn't matter if you took over part way through the tax year, you must still pay the Class 1B NICs - the deadline is 19 October after the end of the tax year.
You must also include your new employees in your Employer Annual Return (P35 and P14s) and in your expenses and benefits forms (P9D, P11D and P11D(b)).
More about completing your Employer Annual Return
Read about how to make expenses and benefits returns
If your business is taken over
If your business and its employees are taken over by another employer, you must inform HMRC of the change. You also need to make sure that you work out, record and deduct the correct PAYE tax and NICs for the period up until your business changes hands. You must:
- Work out the PAYE tax and Class 1 NICs owed on all your employee payments up until the takeover.
- Pay HMRC the PAYE tax and Class 1 NICs you owe within 14 days of the end of tax month or quarter in which the change of ownership occurred (you have 17 days if you pay electronically).
- Record on forms P9D or P11D any Class 1A NICs due on benefits you provided to employees now transferring to the new employer - their new employer will complete and submit the return later.
- Record and pay HMRC any Class 1A NICs due on benefits you gave to employees who left your business before the takeover. The deadline for payment is 19 July after the end of the tax year (22 July if you pay electronically).
It's also important to make sure you let all the relevant parts of HMRC know that your business has been taken over. This will ensure you won't underpay or overpay any tax and will prevent HMRC from sending you demands or bills that you aren't liable for. You can read more about who to contact and what to do in the guide 'Closing or selling a business' - follow the link below.
Read about how to make expenses and benefits returns
Other changes to your business that have PAYE implications
The sections above focus on a small number of major changes that may involve a temporary or permanent end to your PAYE tax and NICs payments to HMRC.
Of course, there are many other potential changes to your business that will have PAYE implications - such as taking on a new employee or paying Statutory Maternity Pay. You'll find guides on these and many other topics elsewhere on this site - use the links below.
If there is a business change that you can't see dealt with on this website, you can contact HMRC's Employer Helpline for advice - Tel 08457 143 143. HMRC also have a New Employer Helpline which specialises in advising employers with less than three years' experience - Tel 0845 607 0143. Both helplines are open 8.00 am to 8.00 pm, Monday to Friday and 8.00 am to 5.00 pm on Saturday and Sunday.
More useful links
PAYE when an employee leaves or retires
PAYE when an employee's circumstances changes
Dealing with expenses and benefits
