Since 6 April 2011 employers have been required to apply an OT code on all payments (other than share based payments) made to an individual after the P45 has been issued. The OT code requires PAYE to be operated on a non-cumulative basis at 20, 40 or 50% (as applicable) without applying any personal allowance. From 6 April 2012, the OT code will apply to all payments including share based payments. To help employers to deal with the practical issues of applying an OT code to share based payments, HMRC has published a set of frequently asked questions (FAQs). Unfortunately, the link to the relevant section of HMRC's website is defective so we can not supply a copy.
However, the FAQs confirm that, in respect of payments made after the P45 has been issued:
- If different parties make payments to an employee in the same payment period, they do not need to consult each other as the 0T code will apply to both payments. This may occur, for example, where different companies in the group make payments or where payments are made by the employer and by an employee benefit trust.
- The 0T code should not be used if an individual has been issued with an NT code.
- As share based payments are treated differently from other payments during the 2011-12 tax year, it is possible that a share-based payment could be made that is subject to the BR code 10-2853779-1 in the same period as another post-P45 payment subject to the 0T code. Where this happens, the final tax code in the employer's P14 should be reported as 0T.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
