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HMRC internal manual

PAYE Manual

HM Revenue & Customs
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Employment maintenance: employment agencies: agency schemes - employer education

The Report of the Payroll sub group of the Better Regulation Task Force was published in March 2000. This Report highlighted the high compliance costs to employers in relation to employment leavers and joiners. The problem being particularly acute for employment agencies due to the volume of client turnover.

A review of employment agencies established that form P46 procedures were not being operated correctly.

PAYE Regulation 28 - (1) stipulates that

  • Form P46 should be sent to HMRC when ’The employer makes any payment of earnings ……..’

Many agency employers submit form P46 to HMRC when the client first registers, not when the first salary payment is made.

Agency clients often register with several agencies simultaneously and may never have paid employment with any of them. They remain registered on the agency ‘books’ until either a P45 is requested or the agency carries out a database cleansing exercise.

The result of sending in unnecessary forms P46 leads to considerable additional paperwork and effort for both employers and HMRC staff. It has long been recognised that employer education, together with continued employer liaison, is the most effective means of reducing the problems experienced by both agency employers and HMRC staff.

Where you can identify agencies who cause problems by premature filing of forms P46 you should inform your Business Support Team who will appoint an Advisor so that an educational visit can be arranged with the employer.

Employer education is a continuous process and you are expected to maintain and develop the working relationship created by the Business Advisor.