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HMRC internal manual

Debt Management and Banking Manual

Debt and return pursuit: PAYE: cessation, cancellation and Cancelled One Year Only (COYO): cessations - introduction

A cessation is where an employer or contractor is no longer making any payments to employees, including directors, and/or subcontractors and does not intend doing so in future.

If an employer has never made any payments to employees or subcontractors, or the scheme was opened in error, the scheme should be cancelled; see DMBM522600. Where there are no payments to employees for a particular year but the employer expects to make payments to employees in future then Cancelled One Year Only (COYO) may apply; see DMBM522610.

In the case of a PAYE and subcontractor scheme (PSC), if one element only has ceased, send a P212 to PAYE Employer Office to have the scheme changed to a P (PAYE only) or XP (subcontractor only) only scheme. The scheme change will happen for the following year. The Employer Office will advise the CIS office appropriately.

Effect of cessation date on P35 & P35PN issue

Where an employer ceases in-year and the cessation date is set before the selection date for the bulk run (usually in January) for returns/P35PN notice to file, BROCS will automatically send the employer a paper P35 for exempt/excluded schemes and a P35PN (CESS) notice to file for all others.

If the cessation date is set after the selection date for the bulk run BROCS can recognise that the date of cessation is later and will do nothing as a return/P35PN notice to file has already been selected to be sent out or sent already.

Employers can send their return at any time before the end of the tax year to cover the period from 6 April to the date of cessation. However legislation does not allow us to insist on the return being sent in until after the 19 May following the end of the tax year to which it relates. EBS/ BROCS can not process returns before the end of the tax year they relate to so there will be a delay in processing these if sent early. DMBM522515 covers returns received in year.

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Notifying Employer Office of a cessation, COYO or cancellation

Where we establish that a scheme should be ceased, Cancel One Year Only or cancelled, the following actions should be taken.


Set the Potential Cessation Date on ETMP, noting the reason for setting the signal. If the employer is also a contractor, confirm they are now only a contractor or ceased altogether. If they are still a contractor, issue a P212 to notify PT Operations of the scheme type change.


Issue a P212 to Customer Operations requesting that the scheme be cancelled and provide the reason for cancellation.

Cancel One Year Only (COYO)

Issue a P212 for the relevant tax year to COYO and BROCS should be made WWTD.