How long can a new PAYE scheme go without a report?

HMRC will close a new employer's PAYE scheme if it receives no report and no payment in 120 days.

Do I need to send anything if I paid nobody this month?

Yes. Send an Employer Payment Summary (EPS) by the 19th after the tax month in which you paid nobody. If you do not, HMRC may estimate what you owe or charge a penalty.

Can I pause my PAYE scheme?

You can tell HMRC in advance that you will pay nobody for between 1 and 12 months by entering a period of inactivity in your EPS.

When should a new company register as an employer?

Before the first payday, and not more than 2 months before you start paying people.

What should I do if HMRC has closed my PAYE scheme?

Contact HMRC's employer helpline before your next payday and ask whether the scheme can be reopened or whether you need to register again.

HMRC 120-day rule: why a new PAYE scheme gets closed

What the 120-day rule says

Once you register as an employer, HMRC expects to hear from you. Every payday you send a Full Payment Submission (FPS). In a tax month when you pay nobody, you send an Employer Payment Summary (EPS) instead.

If you are a new employer and HMRC receives no report and no payment from you in 120 days, it will close your PAYE scheme.

A tax month runs from the 6th of one month to the 5th of the next.

Who it tends to catch

In each of these cases nothing is wrong with the business. The scheme simply looks unused from HMRC's side:

A new company director who registered for PAYE but has not taken a salary yet
A business that registered ahead of a first hire that was then delayed
A company that pays its director once a year but never set up as an annual scheme

How to keep a new PAYE scheme open

The scheme stays active as long as HMRC keeps receiving reports. In practice that means:

Send an FPS on or before every payday, even when the only person paid is a director
In a tax month when you pay nobody, send an EPS by the 19th of the following tax month
If you know you will pay nobody for a while, enter a period of inactivity of 1 to 12 months in your EPS
If you will pay everyone once a year, in the same tax month, register as an annual scheme

Register close to your first payday

You must register before your first payday, and you cannot register more than 2 months before you start paying people. Registering close to the first payday keeps the gap before your first report short.

Your employer PAYE reference number arrives in a letter from HMRC after you register. Keep it: you need it for every report and payment.

If your scheme has already been closed

If you think HMRC has closed your scheme, contact HMRC's employer helpline before your next payday. Explain when you plan to pay someone and ask whether the scheme can be reopened or whether you need to register again. Have your employer PAYE reference to hand.

How PayNinja handles it

With Director's Payroll or Employee Payroll we send the FPS for every pay run and the EPS for every tax month with no pay, so HMRC hears from your scheme each month.

Director's Payroll is £12 a month for your first 2 directors and Employee Payroll is £24 a month for your first 4 employees, as add-ons to PayNinja's accountancy packages.

The 120-day rule: when HMRC closes a new employer's PAYE scheme