HM Revenue & Customs (HMRC) has announced that plans to replace the P45 with a leaver statement have been withdrawn following a consultation about Real Time Information (RTI).

Under RTI - a government programme aimed at improving the operation of PAYE - employers and pension providers tell HMRC about tax, NICs and other deductions when or before the payments are made, instead of waiting until after the end of the tax year.

It had been proposed to give employers participating in the RTI programme the option of providing departing employees with a leaver statement instead of a P45 from April this year.

However, following the consultation and a workshop with employers and representative groups, HMRC will retain the P45 for all employees.

Stephen Banyard, acting director general for Personal Tax, said HMRC has been working closely with employers and stakeholders about the introduction of RTI and the general consensus was to retain P45s.

"RTI is on track and we want to work in partnership with employers and other stakeholders to make its introduction as smooth as possible,” he said.

Colin Ben-Nathan, chairman of the CIOT's Employment Taxes Sub-Committee, has described it as a “sensible decision”, adding that the removal of the requirement to provide a P45 was "well-intentioned, but doing so this year would have been premature and potentially confusing for employers, employees and even government itself". 

He explained: “New employers would have had to grapple with a mix of freeform leaver statements and P45 forms; plus no procedure seemed to have been put in place for ensuring the employee in the middle of all this retained the document for his own use. 

"P45s are widely recognised and widely used, not just by new employers, but by banks, tax advisers and public bodies, as evidence of identity.

"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. 

"We are pleased that HMRC consulted on this issue, listened to concerns and have come to a pragmatic solution that is all the better for having consulted. Once RTI is up and running this issue could be revisited."