Issue 18 of Working Together, an occasional publication sent by the Inland Revenue to agents handling tax matters for their clients, includes a summary of the procedures that must be followed when there is an "Employer Succession", i.e. when

• there has been a change of ownership of a business, and
• the "new owner" agrees to take over the pay records of the old employer.

A "new owner" in this context means a different legal entity from the old owner. It can be a business totally unconnected to the old owner, or a sole trader/partnership which has subsequently incorporated as a limited company.

Both conditions must be satisfied before the Revenue will consider an Employer Succession. Where for example, the new owner continues an existing business but does not assume responsibility for the pay records of the previous owner, an Employer Succession has not taken place.

The old owner

• is responsible for payments of PAYE and National Insurance contributions up to the date the succession took place
  
  
• does not complete forms P45 for the employees transferring to the new employer
  
  
• does not complete a P35 Employer's Annual Return for the year in which the succession took place
  
  
• does not complete forms P14 for the year in which the succession took place.

The new owner

• will require a new Employer's PAYE Reference
  
  
• is responsible for payments of PAYE and National Insurance contributions from the date the succession took place
  
  
• completes a P35 Employers Annual Return for the whole of the tax year in which the succession took place
• completes forms P14 for the whole of the tax year in which the succession took place.

There are no equivalent provisions within the Construction Industry. If a contractor's business changes hands, the old contractor is treated as if the business ceases and the new owner is treated as starting a new business.

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...back to 27 August 2004

Source:
www.inlandrevenue.gov.uk/workingtogether/publications/wt-18.pdf