How and when should forms P45 and P46 be applied?

The following summary of the PAYE rules for the handling of forms P45 and P46 is based on revised guidance published by HMRC in the October 2007 issue of Notes for Payroll Software Developers.

1. P45(1) leaver information

Send to HMRC on the day the employment ceases or, if that is not practicable, without unreasonable delay. Submission on the employee's final payday would be viewed as being made 'without unreasonable delay'.

2. P45(3) starter information

Send to HMRC on the day of commencement. If not available, the P46 procedure should be followed. Submission on the first payday would be viewed as being made 'without unreasonable delay'. Where

• the previous employment ended in the current tax year - use tax code from P45(3) and, if the code is applied cumulatively, the taxable pay to date and tax deducted to date from the previous employment
  
  
• the employment starts on or before 24 May and previous employment ended in previous tax year - increase the tax code from the P45(3) in accord with the latest P9X/P7X instructions and use it on a cumulative basis, and ignore the pay and tax figures from the previous employment
  
  
• the employment starts after 24 May and previous employment ended in any earlier year - use the Emergency tax code on a non-cumulative basis and ignore the pay and tax figures from the previous employment.

3. P46 completed by employee

Allocate the tax code according to the employee's selection of statement A, B or C

• statement A ticked - use the Emergency tax code on a cumulative basis
  
  
• statement B ticked - use the Emergency tax code on a non-cumulative basis
  
  
• statement C ticked - use tax code BR on a cumulative basis

The employee must sign the form. Send to HMRC when the first payment is made.

4. P46 completed (in effect) by employer

Where the form is not completed properly by the employee, or the employee fails to complete a form, use tax code BR on a cumulative basis. Send to HMRC when the first payment is made.

5. P46 followed by P45(3)

If P46 not yet sent to HMRC, i.e. because pay not yet calculated using the P46 tax code, follow the P45(3) procedures described at point 2 above from the first payday, and send P45(3) to HMRC.

If P46 already sent to HMRC, i.e. because pay already calculated using the P46 tax code, and no P6 has yet been received from HMRC, follow the P45(3) procedures described at point 2 above from the next payday, and send P45(3) to HMRC.

6. P46 followed by P6, followed by P45(3)

Where P46 procedures followed and form sent to HMRC, the employer then receives a P6 coding notice. Apply the tax code and previous pay and tax details from the P6. If the employee then provides a P45(3), retain it but do not apply it.

7. Employer completes P46, employee completes P46, employee provides P45(3)

Where the employer (in effect) completes the P46, applies tax code BR and sends it to HMRC, the employee then completes a P46. If the tax code from the new P46 is

• cumulative, apply it retrospectively from the commencement date, and send the new P46 to HMRC
  
  
• non-cumulative, apply it from the next payday and send the P46 to HMRC.

If the employee then provides a P45(3) and no P6 has yet been received from HMRC, follow the P45(3) procedures described at point 2 above from the next payday, and send P45(3) to HMRC.

8. Employee provides more than one P45(3)

Use the P45(3) with the most recent date. If the forms show similar dates for the same employment or the employee provides an additional P45(3) after the earlier P45(3) has been applied and sent to HMRC, contact the employer's tax office for guidance.

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