Employer Further Guide to PAYE and NICs - HM Revenue & Customs

21 Procedures for employer of either an employee
retiring or a deceased employee whose
dependant is entitled to a pension
Pension to be paid by you as the employer
If you are to pay the pension to a retiring employee:
• do not treat the employee as leaving your employment
• do not complete a form P45
• do fill in form P46(Pen). Send it to HMRC online and give
the employee a copy of the form or the information.
When you start to pay the pension, use the employee’s
existing tax code on a week 1/month 1 basis until you
hear from us. If we have not contacted you by 5 April,
(or the employee retires so late in the tax year that the
first pension payment is made after 5 April), carry forward
the existing tax code to the new tax year but use it on a
cumulative basis.
If you are to pay the pension to a dependant of a
deceased employee, follow the procedures under
‘Pension recipient does not give you form P45’ in
paragraph 23.
Pension to be paid by the trustees of a pension fund
As the employer, take the following action:
• treat the pension recipient as leaving your employment
• complete form P45 Part 1 and send it online
• do not complete form P46(Pen).
22 Procedures for employer of an employee
starting to receive a pension whilst continuing
to work for the same employer
Pension to be paid by you as the employer
If you are to pay a pension to an employee who continues
in employment:
• do not treat the employee as leaving your employment
• do not complete a form P45
• do fill in form P46(Pen), send it to HMRC online and give
the employee a copy of the form or the information.
When you start to pay the pension, deduct tax using
code 0T on a week 1/month 1 basis until you hear from us.
23 Procedures for other pension and
annuity payers
All pensions and annuities from, or in respect of, a
registered pension scheme are PAYE pension income.
Pension recipient gives you form P45:
• Use the code from the P45 on a week 1/month 1 basis
until you hear from us.
• You can either complete a P45 Part 3 or P46(Pen) and
send it online. However, we would prefer that you use a
P46(Pen) when you start to pay a pension for the
first time.
• If we have not contacted you by 5 April (or the first
pension payment is to be made after 5 April), carry
forward the existing code to the new tax year but use it
on a cumulative basis.
• If the pension recipient gives you form P45 after the
pension/annuity has started and after you have received
a code from us you must destroy the P45.
Pension recipient does not give you form P45
In all cases complete a form P46(Pen) and send it online.
• Do not give the form to the pension recipient. This is
particularly important where the pension is paid to a
widow, widower or surviving civil partner following the
death of their spouse or civil partner.
• Prepare a form P11 for PAYE purposes only.
• Use the emergency code on a week 1 or month 1 basis.
Term Certain Pensions and Annuities
Pensions and annuities paid from or in respect of
registered pension schemes are PAYE pension income
under the PAYE system. If such pensions or annuities
continue to be paid for a ‘term certain’ following the
death of the pension recipient or annuitant or where
the pensions or annuities are continuing and are paid
to a named beneficiary (for example to a Trustee
administrating a bankrupt’s estate), the continuing pension
and annuity instalments still remain as PAYE pension
income. As a result they must be reported as part of the
Employer Annual Return.
Where such payments are made to a named beneficiary
or beneficiaries you must follow the usual procedure
for new pensions and annuities. However, where the
payments are made to a Personal Representative, Trustee
or Body Corporate (that is a third party or non-individual)
a P46(Pen) is not required. The payment must be taxed
using the Code BR and the details reported on form P14.
If the payment of the pension is passing from the pension
recipient to someone other than an individual:
• do not send a P46(Pen) for the new recipient
• operate code BR
• at the end of the year send a P14 showing details of the
payments made.
You must:
• leave the National Insurance number blank
• enter the Gender as ‘male’
• enter the forename as ‘RP’
• enter the surname with the name of the non-individual.
24 Trivial commutation payments relating
to registered pension schemes
Where a trivial commutation payment is taxable in whole
or part as pension income, then tax has to be deducted
through PAYE from the taxable amount.
Commutation where pension payments have
already started:
• include the taxable commutation payment on the form
P11 you have for the pension payments and operate
PAYE in the normal way
• complete form P45 including the taxable commutation
payment and the pension payments made in the year
• give P45 Parts 1A, 2 and 3 to the pension recipient
• send P45 Part 1 online to us immediately.
17 Chapter 2 CWG2(2012)