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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Charging penalties: suspending penalties: setting suspension conditions: specific conditions: SMART examples: employer compliance example

Employer Compliance example

Number Description Action
1 How the inaccuracy arose From the returns the employer has made, it is established the employer does not have an effective process in place for obtaining form P46 information from new employees who do not have a form P45.

The employer has an induction pack but it does not tell the employees to provide information to the employer for completion of a form P46.

The employer sends a reminder to the new employees to provide this information, but doesn’t always check if this has been provided.

  2 Specific conditions set - SMART criteria not met  To put this right the caseworker sets the following condition.

All workers without a form P45 must complete a form P46 before their first pay day.

This is not a SMART condition because this is what we want the employer to have in place. The caseworker has not specified what changes the employer needs to make for this to happen.    
  3 How to make the specific conditions SMART
Note: From April 2008 when an employer needs or wishes to submit a P46 online they do not necessarily have to get the employee to complete section one. The employer can choose how they get the employees details and whether they need a signature on the paper copy. To make the above example SMART the caseworker needs to specify what processes/systems the employer needs to put in place, which will make certain that all new employees without a form P45, provides information or completes a form P46 themselves before their first pay day. This will prevent the inaccuracy from recurring.

For example, the caseworker should tell the employer:

  • As part of the employees induction, all new employees must provide the employer with a form P45 before their first pay day. If they do not have a P45 they must provide the information to the employer so they can complete a P46 by a specific date (possibly their first pay day if appropriate). The manager must check this has been done. (Specific and time bound).
  • To record the date they received the information, and retain a copy for their records.
  • Where no information is received, they should use the code BR (Basic Rate) as a default on their return to us.
  • To put in place a process for issuing a message with the payslip that the employees who have not yet provided the information to enable completion of a P46 do so as soon as possible.
  • Must give us the assurance that the information they provide to us is supplied by the individual and not anyone else.

The above conditions are Measureable, Achievable and Realistic. The processes can be put in place without burdening the employer.

  4 Methods of checking the suspended conditions to ensure they have been met As above, the caseworker should be satisfied that the processes/systems put in place will prevent the careless inaccuracy from occurring.

The checks can be made by:

Telephone: Ask the employer how the suspended conditions were implemented? How were the processes put in place? In general the caseworker should ask for copies of:

  • The induction material used by the employer which highlights the need for new employees to provide a P45 or information for them to complete a P46.
  • Payroll records, showing how the receipt of a P45 or P46 is recorded.
  • Instructions to payroll to use code BR (Basic Rate), and if applicable, an example of its use.
  • The message issued with the payslip for employees who did not submit a form P45 or provide the necessary information. If the system is electronic you should check if the change to the payroll systems has been made so the message is given automatically.

Correspondence: Ask for a description of the processes put in place and copies of evidence, as in the above telephone call.

Visit: In some cases the caseworker may need to visit the business and see the processes/systems put in place and are working.