Do our clients use the new starter checklist when taking on new employees? This form is not optional, employers should ask all new employees to complete it even if the individual presents a completed P45.
Page 1 of the starter checklist asks the new employee to tick box A, B or C against the following statements:
- This is my first job since 6 April and I’ve not been receiving taxable Jobseeker’s Allowance, Employment and Support Allowance, taxable Incapacity Benefit, State or Occupational Pension.
- This is now my only job but since 6 April I’ve had another job, or received taxable Jobseeker’s Allowance, Employment and Support Allowance or taxable Incapacity Benefit. I do not receive a State or Occupational Pension.
- As well as my new job, I have another job or receive a State or Occupational Pension.
If the individual does not understand the language used, he or she may well leave all three boxes blank, in which case the employer should choose option C and the new employee is given a tax code of OT/1. This leads to the employee being over-taxed as no personal allowance is given. HMRC may take some months to correct PAYE code, during which the employee will be short of cash and thus unhappy. This does not help the business to retain staff.
HMRC is rolling out a program to compare the PAYE codes reported on the FPS with the latest code issued for each employee. Where mismatches are found, the correct code will be reissued to the employer. Check that you are using their payroll software to download your employees’ PAYE codes before each payroll run. Any mismatches between downloaded codes and current employee data (eg name or NI number) should be followed-up with HMRC without delay.
Written by the Tax Advice Network