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In a news item in September 2006, we reproduced guidance published by Institute of Payroll Professionals (IPP) about HMRC's requirement, starting with the 2006/07 tax year, that employers with more than one Employer Contracting-Out Number (ECON) for employees in the same PAYE scheme must set up a new PAYE scheme for each additional ECON. This requirement had prompted numerous complaints from employers, especially from those who had, as a result of mergers, acquisitions or TUPE transfers, acquired several pension schemes and inherited the previous employer's ECON. They would have found themselves having to split their payrolls into small groups of employees, with resulting additional costs.
Official guidance on this situation has now been published by HMRC and it is reproduced below.
"The majority of cases that have been brought to our attention are situations where, as a result of mergers, acquisitions or TUPE transfers, the employer/submitter has ended up with employees under more than one ECON. This has occurred where one employer who has an ECON takes over another. If the other employer also has a contracted-out scheme it too will have an ECON (and SCON). In such instances it is normally the case that the ECON of the company being taken over should be surrendered and the ECON of the parent company/employer should be quoted on the P35.
Where a merger or acquisition has taken place it is important to keep everyone's records up to date. If the employer which has been taken over is to become a subsidiary of the new parent company, form CA7306 Election to vary a Contracting-out certificate for a salary-related, money purchase or mixed benefit scheme should be completed in order to update the contracting-out certificate of the parent employer. In addition, the contracting out certificate of the employer taken over should be surrendered.
However, if the employer that has been taken over is not to continue as a subsidiary, but is to become part of the parent company, form CA7313 Election to surrender a Contracting-out certificate for a salary-related scheme should be submitted to surrender the contracting-out certificate.
In both of these circumstances, form CA1609 Notification of a change in the Employer's Contracting-out Number (ECON) should be completed in respect of all current employees who were previously contracted-out with the employer that has been taken over. This will allow HMRC to update each employee's individual National Insurance account with the parent company's ECON.
There may also be cases where mergers, acquisitions and TUPE transfers have taken place and the employer/submitter has either continued to use or set up separate PAYE references. Employers/submitters in this situation should continue to submit their Employer Annual Return's as they are doing now. The above advice only relates to employers who consider that they have more than one ECON but only one PAYE reference number.
There may be some rare cases where employer/submitters have employees under more than one ECON and do not fall into the scenario outlined above. If this is the case they should contact HMRC's helpline on 0191 22 50264. This help-line is specifically for employer/submitters who believe they have more than one ECON. The helpline is open 9am - 5pm Monday to Thursday and 9am to 4.30pm on Friday."
...UK Payroll News - Latest
Further information:
Sending Employer's Annual Returns covering more than one Employer
CA7306 Election to vary a Contracting-out certificate for a salary-related, money purchase or mixed benefit scheme
CA7313 Election to surrender a Contracting-out certificate for a salary-related scheme
CA1609 Notification of a change in the Employer's Contracting-out Number (ECON)
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