Guidance

Payroll: what to do if your business merges or changes

Find out what to do with your payroll and PAYE reference numbers if your business changes but does not cease to trade.

Mergers and successions: the difference

A merger is where 2 or more PAYE schemes are brought together for the same legal entity. A business merger does not always result in a PAYE scheme merger.

A succession is when the ownership of a business changes from one legal entity to another and the new owner takes responsibility for the pay records.

In both cases you will need to contact the HM Revenue and Customs (HMRC) Employer Helpline. They will confirm whether it’s a merger or succession.

HMRC will tell you which employer reference to use. They may supply you with a new one.

Changes to payroll where a new reference is required

If HMRC’s Employer Helpline tell you to change or use a new reference you must first:

  • transfer the payroll records to the new employer reference
  • send in a Full Payment Submission (FPS) with leaving details under the old employer reference, including the year to date pay and tax figures

You do not need to prepare forms P45 for employees affected by the change. You will, however, need to provide details of their total pay and deductions up to the date the scheme changed.

You must then send in another FPS under the new employer reference, restarting the year to date figures from zero and include:

  • the start date for the new payroll
  • starting details for each employee
  • starter declaration C for BR codes or codes starting with a D prefix
  • starter declaration B for any other code

The last FPS from the old employer reference must be submitted before the first FPS for the new employer reference. If you can’t do this you must contact HMRC’s Employer Helpline.

On your payroll, you must:

  • work out and deduct PAYE tax and National Insurance contributions from any payments made to the transferred employees from the date the scheme changed
  • use the pay and tax details from the old employer reference if you’re operating a cumulative tax code

Moving employees from one payroll to another

Where some, but not all of your employees transfer from one employer payroll to another in your organisation, take the following steps depending on whether you are using different employer references to operate these payrolls.

Employees moving to a new payroll under the same employer reference

Continue to operate PAYE and report payroll information under the same employer reference.

Employees moving to a new payroll under a different employer reference

  1. Transfer the payroll records to the new employer reference.

  2. Under the old employer reference send in an FPS with leaving details, including the year to date pay and tax figures. You do not need to prepare forms P45 for employees affected by this change, although you will need to ensure they are provided details of their total pay and deductions up to the date they moved payrolls.

  3. Under the new employer reference send an FPS restarting the year to date figures from zero. Include the full starting details for the each employee on the FPS for the new reference, use:
    • the start date for the new payroll
    • starter declaration C for BR codes or codes starting with a D prefix
    • starter declaration B for any other code
  4. On your payroll you must:
    • work out and deduct PAYE tax and NICs from any payments you make to the transferred employees from the date they moved payrolls
    • use the pay and tax details from the old employer reference if you’re operating a cumulative tax code

The last FPS from the old employer reference must be submitted before the first FPS for the new employer reference. If you are unable to do this you will need to contact HMRC’s Employer Helpline.

Submitting forms P11D if your business has undergone a PAYE scheme merger, succession or part scheme transfer

The number of P11Ds you need to submit depends on the type of change your business has experienced.

Merger

If your business has undergone a PAYE scheme merger and your employees receive company benefits, you must submit 2 forms P11D for each relevant employee. One under the original PAYE reference for the period up to the merger date and one for the new PAYE reference from that date.

A business merger does not always result in a PAYE scheme merger. If your business has undergone a business merger, and the employees are still employed under the original PAYE scheme reference, only one form P11D is required.

Succession

If you contact HMRC and are told your business has undergone a succession, you must submit one form P11D under the new PAYE reference for each employee in receipt of company benefits. This must contain the total information to be reported for both PAYE scheme references.

If you have not contacted HMRC to advise them of your business succession and your employees continue to receive company benefits, you must submit 2 forms P11D for each employee. One under the original PAYE reference for the period up to the succession date and one under the new PAYE reference from that date.

Part scheme transfer

If your business has undergone a part scheme transfer and your employees continue to receive company benefits, you must submit 2 forms P11D for each employee. One under the original PAYE reference for the period up to the date of transfer and one under the new PAYE reference from that date.

Published 12 June 2014
Last updated 26 March 2015 + show all updates
  1. Guidance for employers on how many P11Ds must be completed for each employee when a business PAYE scheme merges or changes has been added.
  2. First published.