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HMRC internal manual

PAYE Manual

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HM Revenue & Customs
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Employer records: maintain employer record: cessation of an employer record

This subject is presented as follows

RTI automated cessation of an employer record
Manual cessation of an employer record
Permanent cessation
XP schemes
PSC schemes
Ceased employer has restarted
Employer record ceased in error

RTI automated cessation of an employer record

An employer record is ceased when it is no longer required. Some examples of when an employer record should be ceased are

  • There is no longer any employee liable to Income Tax and National Insurance
  • There are no longer any subcontractors
  • The business has ceased to trade

Where a date of cessation is entered on either the FPS or EPS it will flow to EBS where an automated process will take place to identify schemes which can be closed. Where EBS decides the scheme can be closed it will apply the cessation date reported on the RTI submission. Where the record cannot be automatically ceased a work item will be generated on the ETMP Potential Cessation date work list.

The scheme cannot automatically be ceased where

  • The scheme type is PSC or XP
  • The scheme has already

    • Merged out
    • Succeeded
    • Already ceased
    • Cancelled
  • The cessation date is earlier than the start date
  • There is more than 1,000 live employments attached to the scheme
  • There has been a payment made for a pay period after the date of cessation

Following the automated entry of a cessation date EBS will, where the employer record has live employments attached to it, automatically notify the National Insurance and PAYE Service (NPS) to set the ‘P ceased’ indicator on all the live employments associated to the scheme unless the Job Seekers Allowance (JSA) is set.

When the employer submits the employees final FPS cessation details, those details will flow to NPS and update the individuals’ employment record.

The automatic cessation process will not apply to scheme types PSC and XP, instead ETMP Potential Cessation date work list will be generated.

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Manual cessation of an employer record

Where an employer record is no longer required it may be necessary to manually cease the scheme. This may be notified to you by

  • The employer, contractor or agent
  • A form P212 from Debt Management
  • A work item on the ETMP Potential Cessation date work list

If an employer submits an FPS or EPS which shows a date of cessation, a work item on the ‘ETMP Potential Cessation date’ work list will be created if the scheme cannot be automatically ceased. A work item can also be generated by a potentially ceased date being manually entered onto ETMP.

Guidance at PAYE48214 tells you how to deal with these work items.

Employer Annual Return

Where a cessation date is entered on an employer record relating to a non-RTI year it will trigger the automatic issue of a return or return notification. The exceptions to this are employer records that have the scheme types

  • DPGEN
  • DPNI
  • DCNI
  • TAS
  • DOME

The facility to file cessation returns online is available from April 2005 for online filing of returns for 2005-06 onwards.

The Debt Management Office will then pursue the return for the final period of trading.

The return for the year of cessation could either be

  • Sent back to the PAYE Employer Office who will note receipt and then send it immediately on to the Debt Management Office
  • Submitted using online filing. The Central Exception Processing Team located at NICO will send the details immediately on to the Debt Management Office

Or

  • Sent direct to the Debt Management Office

In all cases the Debt Management Office action will

  • Agree any underpayment or overpayment with the employer
  • Obtain payment of any balance due or make any repayment where the overpayment has been justified in accordance with PAYE47061

Note: Repayment of any balance for CIS Deductions suffered to limited company subcontractors will have to wait until all the returns have been consolidated after the end of the financial year.

  • Record receipt of any paper in-year cessation returns (either full or part returns) and retain these until the end of the deduction year

And then

  • Send these to the PAYE Employer Office to process

Conditions

An employer record cannot be ceased if any of the following apply

  • A skeleton employer record exists at the same reference
  • The date entered is in an earlier tax year than one for which a claim for relief for deductions under CIS had been made by the employer
  • A return has been received for a year later than the year of cessation

Note: You must not attempt to cease an employer record if the year is dormant. For more information follow action guide CIS40011.

An employer record should not be ceased if the following are shown on the BROCS record for a year later than the year of cessation

  • (Format 3) Postings Summary

    • Payments
  • (Format 9) Designatory Data For ASN

    • The TC EMPLOYER Indicator
    • CLASS 1A NIC EMP Indicator

Live Employments

Putting a date of cessation on an employer record that has live employments attached to it will automatically notify NPS to potentially cease all live employments, where the JSA indicator is not set, for that PAYE reference.

The employer will submit an FPS for each employee giving the cessation information. When this information is received the individuals’ employment record will be updated with full leaver details.

Note: When manually setting a date of cessation on an employer EBS record you must ensure you are setting it on the correct employer reference. Once the date has been set any live employments attached to that employer reference, with the exception of those with the JSA indicator set, will have the ‘P Ceased’ indicator set on NPS.

If the date of cessation is set incorrectly on EBS and the employer submits an FPS for a pay period after the date of cessation it will automatically restart the EBS employer record, but it will not remove the ‘P Ceased’ indicator off any of the employment records on NPS. To make the employments live again will be a manual process.

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Permanent cessation

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XP schemes

You must not close the employer record as a CIS record is still required to maintain the link between BROCS and the CIS contractor scheme record if you are informed that

  • The employer still has at least one subcontractor

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PSC schemes

You must not close or merge the employer record as a CIS record is still required to maintain the link between BROCS and the CIS contractor scheme record if you are informed that

  • The employer no longer has employees but still has at least one subcontractor

Or

  • A group of companies that work within the Construction Industry all have their PAYE / NIC paid through the parent company

In these circumstances you must amend the scheme type to XP. For more information see the Action Guide ‘Change scheme type - PSC to XP’ at PAYE27035.

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Ceased employer has restarted

You may be informed by an employer, contractor or agent that a business previously ceased has recommenced trading.

In this event you will need to restart the ceased employer record. See PAYE21215.

Auto restart

Where an employer submits an FPS for a pay period after the date of cessation or an EPS for the year following the date of cessation the employer record will be automatically restarted. See PAYE21217 for further guidance.

Note: When an employer record is restarted the computer will automatically clear any intervening years Cancelled one year only.

A full review of the following should therefore be made

  • Employer indicators
  • Scheme type

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Employer record ceased in error

Circumstances may arise when the cessation date entered was incorrect. In such circumstances the action you must take will depend on whether the correct date is earlier or later than the cessation date on the employer record.

Amendment to an earlier date

When the business ceased trading before the date held on the computer record the date can simply be amended to the correct date. Follow action guide CIS40011.

Amendment to a later date

When the business ceased trading at a date later than the date held on the computer record you cannot amend the date shown.

In this situation the employer record must be restarted and then ceased at the correct date. Follow ‘Re-starting an employer record (Action Guide)’ at PAYE21216 and CIS40011.

Notes:

1. When an employer record is restarted the computer will automatically clear any intervening years ‘Cancelled one year only’.
   
  A full review of the following should therefore be made
  * Employer indicators
  * Scheme type
2. From 6 April 2011, an employer record can only be restarted in the year or in the following year that the record was originally ceased.