Closing & Opening a Tax Year

The closing of one Tax Year and the opening of another is a logical process, with all the modern software taking care of business via the use of some form of 'wizard'.

However, there are processes which must be completed and more importantly, dates by when these actions must be completed by if 'late filing' penalities are to be avoided. 

Closing a Tax Year

Who needs to file an Employers Annual Return?

You must complete and file an Employer Annual Return if you have had to maintain a form P11 (or equivalent payroll deductions record) for at least one employee during the Tax Year. This applies even if you didn't have to make any deductions of PAYE (Pay As You Earn) tax or National Insurance Contributions (NICs) from your employee(s) during the year.

The Employer Annual Return comprises of:

• A form P14 for each of the employees for whom you've had to maintain a P11 or equivalent record
• A form P35 which summarises the end-of-year payroll totals for all of your employees combined

If you haven't had to maintain at least one form P11 during the tax year

In this case you don't need to complete an Employer Annual Return but you do need to tell HMRC that you won't be sending one in.

Form P38A - the Employer Supplementary Return

If you are required to file an Employer Annual Return, you'll also need to submit a form P38A to HMRC if you've had any employees during the year to whom both of the following apply:

• You haven't had to maintain a form P11 for them during the year (and therefore haven't completed a P14 for them as part of your Employer Annual Return)
• You haven't completed a form P38(S) for them during the year, to indicate that they're a student who only worked for you during school holidays

You can file a P38A online and HMRC recommends that you do it this way, alternatively you can file on paper. You will not get a penalty for not filing a P38A online.

The requirement to file online

Almost all employers are required to file their Employer Annual Return (P35 and P14s) online. The only employers who can file on paper are:

• Employers entitled to operate PAYE using the Simplified Deduction Scheme for personal and domestic employees - provided they haven't previously received a tax-free payment for online filing
• Practicing members of religious societies or orders whose beliefs are incompatible with the use of electronic methods of communication
• Employers who employ someone to provide care or support services at/or from their home - subject to a number of conditions
• Limited companies filing a return solely to submit an entry in box 28 of form P35 ('CIS deductions suffered') - since April 2011 these returns can be filed online. They should be submitted as a complete return with no P14s

If you file your return on paper when required to file online, HMRC may charge you a penalty.

Make sure your return is error-free

When you file your Employer Annual Return online it's checked against HMRC's Quality Standard to make sure the information you've provided is in the correct format. If your return is rejected you must correct it and file it successfully. You must do that before the 19^th May deadline to avoid having to pay a penalty. If you are unable to meet the deadline then you must file your return as soon as you can after 19^th May to limit the penalty you will face for filing your return late.

Amending your return after you've filed it

If you need to amend your Employer Annual Return after you've sent it to HMRC, you must take the following steps:

• Write to your HMRC office explaining why your return needs to be amended
• Send new versions of the forms that need to be amended
• Only record the difference on those forms between what you had originally filed and what the figure should be. So if you recorded £100 too little tax on an employee's P14, your amended form should show '+£100'
• If you amend any P14s you must send a new P35 with them, even if there are no changes to the figures you reported on your original P35

Sending amended information means that your original return was either incomplete or inaccurate and could mean that you may be charged a penalty. Amended information doesn't have to be filed using the same format you used for your original return. For example, even if you used commercial payroll software to file your return, you could send an amendment using HMRC's free 'Online Return and Forms - PAYE' service.

Opening a New Tax Year

Setting up new payroll records at the start of the Tax Year

At the start of the Tax Year you'll need to set up a new form P11 or equivalent record (either electronic or paper) for every employee who'll be working for you in the coming Tax Year and for whom any of the following applies:

• Their pay is at or above the National Insurance contributions (NICs) Lower Earnings Limit
• HMRC has sent you a tax code for this employee
• You are required to operate a tax code taken from their form P45
• You have paid your employee and are required to operate tax code BR, 0T or the emergency code on a week/month 1 basis in accordance with the P46 procedures

Updates to payroll software and the tax and National Insurance tables

If you use commercial payroll software your supplier should automatically send you updates that incorporate these changes. It's important to make sure you get these software updates.

If you use the interactive P11 Calculator contained within the Basic PAYE Tools package, HMRC will notify you of the required update. Again, it’s important to download this update - the software will do everything for you.

If you use the manual tables, either as a paper or electronic copy, you will need to ensure that you use the correct tables. In January or February HMRC will normally publish new tax and National Insurance tables to use from 6 April - these include any changes that were announced during the last tax year.

If you are continuing to operate a manual payroll there is an alternative to the manual tables. There are some easy to use calculators available to help you to complete your form P11 Deductions Working Sheets(s). You can find a list of all of the payroll tools for employers by following the link below.

Receiving new year tax codes from HMRC

Increasingly, HMRC sends tax code notices online to employers. It will start sending them online as soon as you register for its 'PAYE Online for employers' service - which most employers must do in order to meet the requirement to file their in-year starter and leaver information and Employer Annual Return online.

There are two ways of accessing the tax codes that HMRC sends online. You can:

• Log on to the 'PAYE online for employers' service on the HMRC website and choose the 'tax code notices' option. If you provide the service with an email address, it will send you an email alert each time HMRC sends you an update
• Use the PAYE Desktop Viewer (PDV). This is an application that you can download and install from the HMRC website. It is particularly suitable for employers expecting to receive a lot of tax code notices from HMRC

If you have registered for the 'PAYE Online for Employers' service you can opt out of receiving your tax code notices online, although HMRC would encourage you not to do so.

Applying new tax codes that HMRC sends you

You'll need to update your employees' tax codes before the first pay day of the new Tax Year. The sections below outline the various forms that HMRC uses to tell you about new tax codes, and explain how to use these codes to make sure your payroll calculations are correct.

Form P9X - generic changes

The form P9X ‘Tax codes to use from 6 April’ gives details of any generic changes to your employees' tax codes. These changes are normally made because new tax rates, thresholds or allowances are coming into effect and will affect the amount of tax you'll need to deduct from your employees' pay from 6 April.

For employees for whom you haven't received a form P9(T) and for whom you don't have an unused P6 (see later sections):

• Carry forward the authorised tax code from their last year's form P11 or equivalent payroll record to their payroll record for the new tax year
• Apply the instructions from form P9X

If you have received a form P9(T) for an employee, or you have an unused P6 for them which arrived too late to use, follow the guidelines in the sections below.

Form P9(T) - individual changes

For some employees HMRC may also send you form P9(T) ‘Notice to employer of employee's tax code’. This shows a revised tax code for the following tax year. You won't get a new individual tax code for every employee - only if individual adjustments are needed to their tax code.

If you get a form P9(T) for an employee, you must:

• Scrap any previous P9(T) for the same employee which has an earlier date
• Keep the most recent P9(T) to update an employee's record
• Use the code shown on the new form from 6 April

Where, exceptionally, you receive a P9(T) or other tax code notification significantly later than the date from which it is to be applied contact your tax office for confirmation of the code to be used.

Employee not issued with a form P9(T) but has an unused form P6

If you received an in-year tax code change for an employee on form P6 but it arrived too late to use it in the last year, carry forward this code to the new Tax Year and follow the P9X instructions.

To view HMRC’s Guide to Starting a Tax Year please follow this link http://www.hmrc.gov.uk/helpsheets/2012/e11.pdf

Important dates to remember

Official Deadline	Task
19th April	All postal payments of Tax & Class 1 NIC must reach your HMRC Accounts office.
22nd April	All electronic payments of Tax & Class 1 NIC must reach the HMRC bank accounts. NOTE: The 22nd is a Sunday in 2012 so funds must be cleared on Friday 20th April.
19th May	The Employers Annual Return (P35 and P45s) must be submitted on-line (unless you have a statutory exemption) by this date.
31st May	The last date that you must have given your staff their P60 by.
6th July	The Return of Benefits and Expenses (P11D, P9D and P11D(b)) must be received by HMRC. You must also give your employees a copy of their P11D and P9D.
19th July	All postal payments of Class 1A NIC must reach your HMRC Accounts office.
22nd July	All electronic payment of Tax and Class 1 NIC must reach the HMRC bank accounts. NOTE: The 22nd is a Sunday in 2012 so funds must be cleared by Friday 20th July.

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