A P45 is given to workers when they move to a new employer or lose a job. By law a P45 has to be issued, recording pay and tax deducted in the year so far.
However, it became a byword for being given the sack.
A plan to replace the form with a “leaver statement” has now been dropped by HM Revenue and Customs.
New regime
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HMRC is moving to a system of Real Time Information, under which staff movements will be recorded much more quickly. Trials start in April.
It had been thought that the P45 – which has been in existence since 1944 – would be unnecessary and its days were numbered, but HMRC said it would be retained.
“Employers told us to keep the P45, which is exactly what we have done,” said Stephen Banyard, head of personal tax.
Under Real Time Information procedure, P45s will be given to the employee to take to their next employer.
The move was welcomed by the Chartered Institute of Taxation (CIOT), which said that removing the P45 would have been confusing.
“P45s are widely recognised and widely used, not just by new employers, but by banks, tax advisers and public bodies, as evidence of identity,” said Colin Ben-Nathan, of the CIOT.
“Introducing an alternative document alongside the P45 without an adequate educational process and amendment of rules and training manuals would be confusing and likely to increase bureaucratic burdens, the opposite of the government’s intentions.”
Chas Roy-Chowdhury, head of taxation at the ACCA, an accountancy body, said that withdrawing the P45 would have meant the end of standardisation of this paperwork.
This would have caused problems for tax calculations, he said.
