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Sam, Accountant
Category: UK Tax
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An employee is shortly to leave us. We will pay notice but

Resolved Question:

An employee is shortly to leave us. We will pay notice but she will not work her notice. She also has a company car which she will have the use of during her notice period. Should we pay her notice pay in advance and when should her P45 be issued - now or at the end of the notice period, please?
Submitted: 7 years ago.
Category: UK Tax
Expert:  Sam replied 7 years ago.
HiCustomerbr />
Thanks for your question

The P45 should reflect the actual date of leaving, which will be inclusive of the notice period - so after the employment has actually ceased - similarly the P11d for the company car will tie in with this date as to when the car was available to

You will not issue the P45 until after this notice period - but should warn the employee that if they get employment in the meantime - that BR tax will apply on earnings made from new employment, up to this official date of leaving and then hand this P45 to that employer once received

You can make this notice pay in advance - but make sure the date of leaving and the month in which this pay is amde, reflects the actual elaving date - and in this instance you can issue the P45 with immediate effect



Edited by SamTax on 3/3/2010 at 6:14 PM EST
Customer: replied 7 years ago.

Many thanks, Sam


Sorry to be dense but I don't quite understand your last paragraph. If, say our employee's last day of work was 31st March 2010 and we paid her 3 months notice, in advance, i.e. effectively employed until the end of June, how does this effect the dating of P45 and issue of same, please?

Expert:  Sam replied 7 years ago.

You are not being dense at all - I am happy to ask questions until such time you are happy with the answer

If you are to make the payment now - for a notice period 3 months in advance - then we breach into the new tax year and you will produce a P45 that pays her up to June 2010 - showing the sate of leaving as 30 June 2010 - Pay (which will just reflect the 3 months money for end of April end of May and to the end of June) and also 3 months worth of personal allowances -

Its only her final day working that is 31 March 2010 - but she is in effect being given 3 months notice - of which you would treat her as an employee until 30 June 2010
So the P45 will show date of leaving 30 June 2010 - Code 647L - Pay period Month 3 then also show the Pay xxxx Tax xxx

You will include her on the P35 for 2010/11 and a P11d also would need to be sent in for 2010/11 -

If you had not been continuing to provide her with the company car - then you could have just finalised this by making her leave date 31 March 2010 - will 4 months pay for March (March itself April May and June) - which would have collected BR (D0 if higher rate) tax on the 3 months notice - but as you are still treating her fully as an employee until 30 June 2010 - then the P45 must tie in with that and her actual employment leaving date



Customer: replied 7 years ago. it cleaner to not pay the notice in advance but to pay as separate payments for April, May, June?


(You will deserve a bonus for this one)!

Expert:  Sam replied 7 years ago.
Hi dlc

Thanks for your response and you ask as much as you feel you need to - I am happy to keep responding - and a bonus would be very much appreciated !

It would be cleaner to pay the lot at 31/03/2010 - and charge tax on it - issue a P45 - Month 12 - etc etc - but as the company car will continue to June 2010 - you are somewhat forced into running each pay roll run for this employee at the end of each month until the notice period is up (30 June 2010)

So run the payroll at the end of each month - allowing the pay to be given tax free allowances - and then taxed and charged National Insurance accordingly (which includes a benefit charge for the company car - and any other company benefits)

Or we would have company car for the period 06/04/2010 to 30/06/2010 with no employment on which tax can be collected on this benefit - which would put this employee is a potential unpaid tax position !


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