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Following consultation with employers, tax advisers and other stakeholders of the Real Time Information system, HM Revenue & Customs has decided to retain the form P45. Initial discussions suggested that the form was to be scrapped and replaced by a ‘leaver statement’. However, fierce opposition to the removal of the form has resulted in its retention.

The RTI pilot will begin in April 2012, with employers who have volunteered to take part. Software developers will also be taking part in the pilot, with discussions held with all stakeholders to ensure a smooth introduction of the new system. The new system will require employers to report deductions of tax and National Insurance as they occur rather than at the end of every year, as it happens currently. The form P45 records the pay received by an employee and tax paid, in addition to the tax code operated during a year.

Although the form will be retained, it won’t be dealt with as it is now; it will be given to the employee who will hand it in to his new employer. The acting director for Personal Tax at HMRC, Stephen Banyard said:

“We have been working closely with employers and stakeholders about the introduction of RTI. Employers told us to keep the P45-which is exactly what we have done.”

Banyard also stated that HMRC wanted the transition to RTI to be as easy as possible, which requires consultation. All employers will be expected to start using RTI from April 2013, with all employers using the new system by October 2013.

About The Author

Kara Copple

An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

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