Business Changes Affecting Payroll

When your business undergoes significant changes such as a merger, acquisition, or change of ownership, you must notify HMRC and take specific steps to ensure your payroll records remain compliant. The actions you need to take depend on the type of change and whether you'll be using a new employer PAYE reference. Getting this wrong can lead to reporting errors, so it's important to follow the correct process.

When to contact HMRC about business changes

You must contact the HMRC Employer helpline if your business experiences:

• A merger of two or more PAYE schemes
• A succession (when another legal entity takes ownership of your business and becomes responsible for pay records)
• A sale of a business in liquidation or administration

HMRC will confirm whether your situation counts as a merger or succession, tell you which employer reference to use, and provide a new employer reference if you need one. A succession may involve the sale of a business being handled by an insolvency practitioner.

Moving employees between payrolls

Same employer reference

If you're moving employees to a new payroll but staying under the same employer reference, continue to operate PAYE and report payroll information as normal using that reference.

Different employer reference

When moving employees to a payroll under a different employer reference, you must follow a specific sequence:

1. Transfer the payroll records to the new employer reference

2. Send HMRC a Full Payment Submission (FPS) under the old employer reference, including leaving details such as pay and tax figures for the year to date

3. Provide transferred employees with details of their total pay and deductions up to the date they moved payrolls (you don't need to give them a P45)

4. Send HMRC an FPS under the new employer reference

5. Update your payroll software

You must submit the last FPS from the old employer reference before submitting the first FPS for the new employer reference.

Creating your first FPS under a new employer reference

When you submit your first FPS under a new employer reference:

• Restart the year-to-date figures from zero
• Include full starting details for each employee
• Use the start date for the new payroll
• Use starter declaration C for Basic Rate (BR) codes or codes starting with the letter D
• Use starter declaration B for any other code

After employees move payrolls, you must continue to deduct PAYE tax and National Insurance contributions from any payments you make to them. If you operate a cumulative tax code, use the pay and tax details from the old employer reference.

Reporting benefits in kind (P11D forms)

The number of P11D forms you need to submit depends on the type of change your business has experienced.

After a merger

If your business has merged PAYE schemes, submit two P11D forms for each employee receiving company benefits:

• One form under the original PAYE reference covering the period up to the merger date
• One form under the new PAYE reference covering the period from the merger date

You only need to submit one P11D form if you've undergone a business merger but not a PAYE scheme merger.

After a succession

If you've told HMRC about your business succession, submit one P11D form for each employee receiving company benefits under the new PAYE reference. This single form must contain all the information to be reported for both PAYE references.

If you haven't told HMRC about your business succession, you must submit two P11D forms for each employee receiving company benefits:

• One form under the old PAYE reference covering the period up to the succession date
• One form under the new PAYE reference covering the period from the succession date

After a part scheme transfer

Submit two P11D forms for each employee receiving company benefits:

• One form under the old PAYE reference covering the period up to the transfer date
• One form under the new PAYE reference covering the period from the transfer date

Updating your business details with HMRC

You must tell HMRC about changes to your business name, address, or other details. You can update your business details online through your business tax account, which covers most services including PAYE for employers.

For VAT changes, you must notify HMRC within 30 days. If your bank details change, you must give HMRC 14 days' notice.

If you change your business's legal structure (for example, becoming a limited company or setting up a partnership), you must register under your new structure and tell HMRC about closing your previous structure.

Partnership changes

You don't need to tell HMRC when a partner joins or leaves unless your partnership is VAT-registered. In that case, you must notify HMRC within 30 days by completing form VAT 2, or you may face a fine.

If a partner dies or is made bankrupt and there are only two partners, the partnership will be automatically dissolved. The remaining partner must re-register for Self Assessment as a sole trader. With more than two partners, the partnership will be dissolved unless the partnership agreement states otherwise.

Getting help

Contact the HMRC Employer helpline if you need assistance with payroll changes resulting from mergers, acquisitions, or changes in business ownership. For other business changes, you can contact the relevant HMRC helpline or write to the National Insurance Contributions and Employers Office at HM Revenue and Customs, BX9 1BX.

Sources

• Payroll: what to do if your business merges or changes ownership
• Tell HMRC about a change to your business

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.