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Where a payment to an employee covers both pre and post appointment periods, all the Income Tax and National Insurance contributions deducted and due on any payslip issued to the employee after the relevant date of the formal insolvency procedure, should be paid toÌýHMRCÌýas an expense of the insolvency.

A formal insolvency procedure can include:

• in administration
• compulsory liquidation
• creditors’ voluntary liquidation
• bankruptcy
• sequestration

This is described inÌý. It states thatÌýPAYEÌýapplies at ‘the time the payment is made’ or ‘the time when a person becomes entitled to payment of or on account of the earnings’.

All the Income Tax and National Insurance contributions due at the time of payment should be returned toÌýHMRCÌýby the employer who made the payments.

For more information, read theÌýEmployment income manualÌýEIM42270: employment income: basis of assessment for general earnings: the time when earnings are received: actual payment.

A company’s existingÌýPAYEÌýScheme should continue to be used for these post-appointment payments. A newÌýPAYEÌýscheme is not necessary.

For more information, read theÌýPAYEÌýmanual PAYE21130: Employer records: maintain employer record: insolvency of employer.

24.2.1 Recording tax and National Insurance for former employees of an insolvent entity

There may be times when you need to record tax and National Insurance due on a dividend paid to the former employees of an insolvent entity.

For example:Ìý

• holiday pay
• arrears of pay arising before the date of insolvency
• pay in lieu of notice claims
• redundancy pay

Help us make sure these payments are allocated correctly by setting up a newÌýEPAÌý²õ³¦³ó±ð³¾±ð.

You should:

• contact us to set up the scheme only when you are ready to make the payments
• make sure when making payment that the Accounts Office reference number for theÌýEPAÌýscheme is used to ensure correct allocation of funds
• once the final dividend payment has been made, make sureÌýHMRCÌýreceives a final Full Payment Submission (FPS) with a cessation date

This will prevent any reminder or late penalty notices being issued, should the scheme remain open.

24.2.2 How to set up an Employment Protection Act (EPA) scheme

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Tell the adviser you need to set up anÌýEPAÌý²õ³¦³ó±ð³¾±ð.

They will ask you for the following information:

• the name and National Insurance number of directors (if available)
• the phone number and email addressÌýof the insolvency practitioner
• the registered office address of the insolvency practitioner
• any other correspondence addresses we may need to note for you
• date of the first pay day
• Enforcement and Insolvency Service (EIS)Ìýreference number

Our adviser will then ask some more questions and tell you what you’ll receive and when.

Once theÌýEPAÌýscheme is set up, readÌýPAYEÌýand payroll for employersÌýfor guidance on operatingÌýPAYE.

24.2.3 Making additional payments

If you need to make additional payments after the finalÌýFPSÌýhas been submitted, submit anotherÌýFPSÌýwith the revised date of cessation.

This can only be done in either the:

• same tax year as the date of cessation or cancellation
• next tax year after the date of cessation or cancellation

For any other year, a further scheme will need to be set up.

24.2.4 Additional Information

We are still receiving some payments of tax and National Insurance contributions due on these payments where anÌýEPAÌýPAYEÌýscheme has not been set up. This means we’ve been unable to allocate the payments and update the employeesÌýPAYEÌýtax and National Insurance contribution records.

If you set up anÌýEPAÌýscheme you must submit anÌýFPS, failure to do so means we’ll be unable to allocate the payments and update the employeesÌýPAYEÌýtax and National Insurance contribution records accordingly. We cannot accept this information by letter.

For guidance on this process readÌýPAYEÌýand payroll for employers.