Record changes to your business status in Sage Payroll.
Description
Your business may change status from a sole trader or partnership to a limited company. You must inform HMRC of the change. What you need to do depends on how your business is currently set up and what changes you’re going to make.
First, contact the HMRC Employer’s helpline. Get confirmation before carrying out the steps in this article.
They may ask you to carry out procedures for the sole trader or partnership. You must also set up the limited company as a completely new business.
They may ask you to carry out procedures for the sole trader or partnership. This usually happens at Payroll Year End. You must also set up the limited company as a completely new business.
Resolution
▼ Steps to carry out in your existing company
When your company status changes:
- Set up a new registration of Payroll with the new PAYE reference
- Close your existing PAYE scheme
- Complete your final payroll tasks in the right order
- Notify HMRC that your PAYE scheme has ended.
You can use Sage Business Cloud Payroll to close off your company’s payroll. You then submit the relevant information to HMRC.
- Set each employee to be a leaver on the date that the business ceases trading as a sole trader or partnership.
- Complete the final pay run of the business as a sole trader or partnership.
- Submit the final full payment submission (FPS).
- Review P11 values.
- Submit the final Employer Payment Summary (EPS). From the Year End tab. Select The company has closed down the PAYE Scheme and enter the date the PAYE Scheme closed.
- Distribute P45s to all employees.
▼ Steps to carry out in your new company
- Sign up for a new Payroll service.
- Sign in to the new service, and select New Company.
- Set up your pay day calendars.
- Create your employee records and enter the relevant values from the P45s.
▼ Points to Note
Statutory Adoption Pay, Maternity Pay, and Paternity Pay
The change of employment start date may affect employee SAP, SMP and SPP payments.
Statutory Sick Pay (SSP)
The SSP calculation uses eight weeks gross pay from a particlular period. This may not be available after a change of company status.
An employee can have SSP from the day they start with the company. They must meet the qualifying criteria. This includes their Average Weekly Earnings (AWE). Their AWE must be being over the NI Lower Earnings Limit (LEL). To calculate the employee’s AWE, see the HMRC Employer Helpbook for Statutory Sick Pay – E14.
You may have processed SSP in the eight weeks previous to changing the status of your company for any employees. You must enter historical SSP information. This is so the system can calculate linked periods of incapacity for work.
Student loans
A change of legal status doesn't affect an employee’s student loan obligation.
If their earnings are above the annual threshold, they must continue their repayments.
Attachment of Earnings Orders (AEO)
There is a legal requirement for the employee to continue to repay AEOs. The deduction continues as normal. The employee attachable earnings must be above the protected earnings value.
However, you need to set the AEO up again, in the new payroll.
Default Payment and Deduction Values
Payments and deductions must be set up in the new business.
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