Avoiding Problems When Switching to New Payroll IDs or Payroll Providers

The Institute of Chartered Accountants in England and Wales (ICAEW)’s Tax Faculty has outlined the steps employers need to take when changing payroll IDs (PIDs), switching software providers, or using a different payroll agent to prevent complications with HMRC’s systems.

Duplicate Employment Records: Common Triggers

HMRC may create duplicate employment records under these circumstances:

• When employees are moved between payrolls, such as when an employer changes payroll software or payroll agent.
• When an employer updates an employee’s PID.

In addition, PAYE issues can arise if a former employee is rehired, or when an employee is paid for two separate roles under the same PAYE scheme.

Transferring Employees Between Payrolls

Moving employees between payroll systems, including switching software or payroll agents, can frequently lead to duplicate records in HMRC’s database. To prevent this, it is essential that PIDs and other employee details are consistent.

ICAEW suggests making these updates in the first month of the tax year, though this may not always be feasible. Employers or payroll agents may need to contact HMRC’s Employer Helpline for assistance in resolving discrepancies between their own records and HMRC’s. If there are discrepancies between the employer’s records and HMRC’s liabilities and payments, the matter should be escalated to HMRC’s Charges Resolution Team.

Changing a Payroll ID

HMRC’s PAYE Real Time Information (RTI) guidelines specify the steps to report a PID change. Employers should submit the Full Payment Submission (FPS) as follows:

• Enter the new PID in the ‘Payroll ID’ field.
• Check the ‘Payroll ID changed indicator’ box.
• Enter the previous PID in the ‘Old payroll ID for this employment’ field.

It is crucial to enter the correct old PID, especially when the employee has had other roles with the same employer. For an ongoing employment, do not enter a new start date or complete a starter declaration.

Failure to follow these steps will prevent HMRC from matching the FPS to earlier records, leading to the creation of a duplicate record under the new PID.

The start date and starter declaration fields should only be completed in the initial FPS submission when the employee begins employment. This information is processed similarly to a P46 new employment notification and takes precedence over PID updates.

If a duplicate record is created, employers will need to contact HMRC’s Employer Helpline to request that HMRC aligns the old PID with the new PID on the latest FPS.

Rehiring a Former Employee

If an employee has left and a leaver FPS was submitted to close their record, that employment has officially ended. If the individual is rehired, they are considered a new employee, and employers must follow HMRC’s standard procedure for onboarding new employees.

Employers should avoid:

• Reusing an old PID; the rehired employee should receive a new and unique PID.
• Checking the Payroll ID update box.
• Including the PID from the previous employment, as this would incorrectly reopen the previous employment record.

When reporting the new employment, only the pay and tax from the new role should be included. Do not combine previous employment’s pay and tax figures as this could create discrepancies.

If an employee presents a P45 and a refund is due, employers should report the tax refund as instructed in the RTI guidance. The FPS for the new employment should not include any pay from the previous employment, as doing so will duplicate the pay and create inaccuracies in NIC calculations and tax assessments.

For employees who left in a previous tax year and are rehired in the current year, employers should not report pay and tax from the earlier tax year, as it pertains solely to that period.

If the employee is within self-assessment (SA), they should file separate tax return pages for each employment with the same employer.

Employees with Multiple Jobs Under the Same PAYE Scheme

When an employee holds more than one role with the same employer, even if they are paid under the same PAYE scheme (e.g., one role paid weekly, another monthly), each job must be assigned a unique PID. This also applies if the same PAYE scheme is used for both jobs. Refer to HMRC’s guidance on assigning PIDs.

ICAEW’s Tax Faculty advises against paying employees for multiple roles within the same PAYE scheme. While separate PIDs for different roles will be visible in an individual’s personal tax account, only the most recent FPS will appear in HMRC’s enterprise tax management platform (ETMP).

This can lead to a situation where, even if the correct PAYE has been paid, ETMP might show an overpayment. HMRC has stated that this is not a system error but may require manual correction in certain cases.

For information and advice on your own specific circumstances, please contact us directly.