Can employers lawfully provide electronic P60s instead of printed P60s?

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The requirement for employers to provide a P60 is set out in Regulation 67 of the Income Tax (Pay As You Earn) Regulations 2003. It says: "Before 1st June following the end of the tax year, an employer must give a certificate (Form P60) to every employee (a) who was in the employer's employment on the last day of the tax year, and (b) from whose relevant payments the employer was required to deduct tax at any time during that tax year."

Regulation 67 also defines the information that must be included on a P60. The standard single-part P60 supplied by HMRC contains all of the information needed to meet the statutory requirements. Employers are permitted, however, to produce a P60 in any format they wish, subject to prior HMRC approval of the content, as long as it includes the information specified in Regulation 67. Booklet RD1, which contains the guidance for pre-approval of substitute P60s, allows them to be "produced using paper of any reasonable size or paper-weight", "pre-printed or computer-printed as an 'overlay' on plain paper", using "'multipart' or 'pressure-seal' mailer stationery", on white or other colour paper, in "any reasonable ink colour(s)", in any format or layout, and without following "the precise box-sequence of forms P14/P60".

The trend towards replacing paper employee payslips with electronic versions has prompted many employers to ask HMRC if P60s may also be distributed electronically. HMRC's answer is clearly stated in the guidance for employers on Online Filing: "Even if you have been giving your employees electronic payslips, you must give your employees a paper form P60 at the end of the tax year. You must not, by law, give them P60 details electronically for them to print off."

HMRC's assertion that electronic payslips are not permitted by law is arguably wrong. Regulation 67, as quoted above, does not refer to a "written" form, as the Employment Rights Act 1996 does in connection with payslips. It does describe the P60 as a "certificate", but that term is used of other documents, such as the certificate section of the P35, which may be filed electronically.

If the P60 can exist in almost any format, provide the specified information in any layout, and be printed by employers on any size or type of paper, why can it not also be sent electronically to employees so that they can print it out on A4 paper when it is needed? And how would anyone tell the difference between a P60 printed by the employer and one printed by an employee? In a small office, the printer that the employer uses to print off substitute P60s could be the same printer that is used by employees for printing off their own P60. They would be identical.

Nevertheless, HMRC is adamant that paper P60s are a legal requirement. Its position is based on a Table in Regulation 211 of the PAYE Regulations, which sets out two requirements.

(1) Paragraph 211(2) states: "The requirements of the regulation must be complied with in a document or format provided or approved by the Board of Inland Revenue if so indicated in column 4." For form P60, the Table in column 4 of the Table says "Yes".

(2) Paragraph 211(4) states: "Instead of sending a document to the Inland Revenue, the requirements of the regulation may be complied with by an employer arranging for the information it would contain to be delivered to the Inland Revenue by an approved method of electronic communications if so indicated in column 5." The entry for form P60 in column 5 of the Table says "No" to electronic communications.

However, the Table applies only to communications between employers and HMRC, not to communications between employers and employees. The "No" must, therefore, cannot mean "No, form P60 cannot be sent electronically to employees", but "No, electronic communication is not relevant for form P60".

Nevertheless, in a written response to the points made above, HMRC is resolute.

"The common and everyday definition of a document is a piece of paper which provides information. This definition is reflected in Regulation 211. It would be unusual if this were not so because paper was at one time the only available information medium, whereas today we have a mixture of paper and electronic. Under 211(2) it is accordingly mandatory to use the [paper] document provided by HMRC or an approved [paper] substitute. The only exception to that is provided by 211(4) which distinguishes between documentary and electronic information by providing that, instead of 'sending' a document to HMRC, information may be 'delivered' by electronic means where authority to do so is expressly given. Column 5 then indicates if authority is given to use electronic delivery and, in respect of form P60, it is clearly withheld.

It is acknowledged that the 'no' in column 5 primarily relates to information between the employer and HMRC (rather than employer and employee). But given the purpose of form P60 (and, for example, form P45 parts 1A, 2 & 3), the only logical construction possible is that an employer must not give an electronic P60 to an employee.

HMRC have no current plans to review these arrangements. We feel that electronic P60s will increase the risk of fraudulent manipulation by unscrupulous taxpayers and will therefore devalue the form. A relaxation of the P60 rules may also have the unwelcome result of some employees being coerced into using the electronic medium against their wishes. HMRC will however continue to monitor the development of electronic delivery in the modern world and respond appropriately if change becomes necessary or desirable."

At present, therefore, and until HMRC can be persuaded that the issuing of electronic P60s is no more open to fraud than paper versions, employers must continue to issue only paper P60s.

...UK Payroll News - Latest

Further information:
1.40 End of year certificate - P60
Specification for Employer Substitute Forms P60

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