HMRC’s updated PAYE insolvency guidance now flags a narrow but serious control risk in pre-pack sales and trading continuity reviews. HMRC says a buyer who “incorrectly uses the PAYE reference” can create filings it “cannot remove or amend” later. The same update also says, “If you continue to employ staff, you need to submit RTI returns to HMRC.”
What the source says
The 4 November update widens HMRC’s chapter on PAYE in insolvency. HMRC says it now covers retained staff, employee distributions and Employment Protection Act schemes. The refresh also addresses Apprenticeship Levy, Employment Allowance, CIS deductions and nil tax codes.
Section 24.3 says retained staff can stay on the insolvent employer’s PAYE scheme during the office holder’s period. Section 24.4 then requires RTI returns whenever those staff are paid. Within that framework, section 24.2.1 warns against reusing the insolvent employer’s PAYE reference after a transfer.
If the buyer does so, payroll data can sit with the wrong employer record. HMRC says it cannot remove or amend those filings. That leaves office holders and payroll teams carrying a preventable reporting error.
What to check
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Check the appointment date against the employee transfer date, because the PAYE scheme changes at the handover point.
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Confirm the buyer opened its own PAYE scheme before paying transferred employees, rather than using the insolvent employer’s reference.
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Review which entity submitted post-appointment RTI returns for wages, tax and National Insurance.
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If employees were not retained, check whether payments went through an Employment Protection Act scheme.
What this means for UK creditors
This is not just a payroll technicality. If the wrong PAYE reference is used, trading continuity can look cleaner than the underlying control position. A creditor may see staff and sales continue, while payroll reporting sits on the failed employer’s record.
That matters when you assess who owes current taxes, who should receive invoices and who is actually employing staff. Where a pre-pack preserves staff, payroll control is part of counterparty control. For suppliers and lenders, it is a prompt to tighten transfer checks before restoring terms.
Verify the appointment date, the transfer date and the purchaser’s PAYE reference next.
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This article repeats facts from official UK public registers (Companies
House, The Gazette, HM Courts and Tribunals Service and the Insolvency
Service) as published on the date shown. RecoupIQ adds no inference or
allegation, and makes no assertion of insolvency, fraud, or wrongdoing
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