From April 2013, the P38(S) process will no longer be used when only employing students during their term vacation periods; from that time they must be treated as any other employee. HMRC announced this to software developers on 15 March.
Although HMRC have stated that form P38(S) will no longer be available to use from April 2013, they’ve also stated that “employers participating in the Real Time Information pilot will not be able to use form P38(S) when employing a student during the [term] vacation”. As HMRC is hoping to bring in 250,000 volunteer employers into RTI by November this year, this statement could affect a lot of employers during the tax year 2012/13.
However, HMRC further states that employers must only not use the P38(S) process at all during the tax year 2012/13 “if the employer knows [emphasis added] that they will be going on to RTI whilst employing a student”. It’s only these employers that “will not be able to use form P38(S) and should treat that student the same as any other employee” during 2012/13.
But what about all those employers who are not yet definitely booked to join the RTI pilot and they employ students during term vacation periods only? What happens if they’ve already used the P38(S) process during 2012/13 by the time it’s agreed they’re going to join the pilot?
HMRC outlines the procedures that should be followed.
- Those ‘Controlled Go-Live’ volunteer employers from April 2012 - These employers should not use the P38(S) process at all during 2012/13 and will treat students in the same way as any other employee.
- Those joining in May – June 2012, HMRC says are unlikely to be impacted unless they have employed students during the Easter break and have used the form P38(S) procedure; these employers will follow the process outlined below.
- Those joining in July – September 2012, should not use form P38(S) for students working for them during the summer vacation. However, if they do use the form P38(S), they’ll need to follow the process outlined below.
- Those joining during November, December 2012 & March 2013 – these employers can use form P38(S) over the 2012 summer holidays if they want to, and employers joining RTI in March 2013 can also offer it over the 2012 Christmas holiday. If they do, they too will need to follow the process outlined below.
If an employer has used the P38(S) process for any student employees during the tax year 2012/13, they must include details in the payroll alignment process when they move to Real Time Information. They will need to show the student employee as a leaver when reporting the pay they received during holiday time by entering tax code ‘NT’, and the last date of payment as the date of leaving.
Once an employer has voluntarily joined RTI before April 2013, and a student subsequently returns to the employer during another holiday period they will be treated in exactly the same as any other new employee starting employment.
There are two things which stand out in the HMRC announcement about the demise of form P38(S).
Once an employer has voluntarily joined RTI during 2012/13, they’ll no longer be able to go on using forms P38(S) even if they did up to the point they joined the pilot.
And of course, no employer joining RTI from April 2013, and any employer already in RTI before that date, will be able to go on using any forms P38(S) at all from the beginning of the tax year 2013/14.