When you first register your company with HMRC as an employer, you’ll receive all sorts of information and reference numbers in your official welcome pack. One to look out for – and keep safe – is your Employer Reference Number (ERN).
You don’t have to request the number as you’ll be issued an ERN automatically. From that date on, you may be asked to give your ERN in various situations including when you correspond with HMRC.
Unique to your business, the ERN consists of a three-digit tax reference number comprised of two parts, for example 246/XYZ0246.
You may also see it referred to on tax forms (such as your P11D) as your PAYE reference.
When should you register?
Make sure you register your company as an employer well before the first payday as it can take up to five days for your reference number to come through. The vast majority of contractors will hire an accountancy firm as soon as they start contracting, so your accountant will typically register your company for all relevant taxes.
You can register up to two months before the first payday but no sooner than that. If you pay an employee before you receive their ERN, you can still run the payroll, provided you keep a copy of the payment details and send a late full payment submission to HMRC.
Director of a limited company
It’s important to note that you must register your company as an employer with HMRC even if you are the sole director of a limited company and also the sole employee.
More than one PAYE scheme?
Each ERN identifies a single business, but if your company operates separate PAYE schemes across a number of different locations, you may be issued with an ERN for each scheme. It’s your responsibility to keep track of these and make sure you use the correct one in any official correspondence.
When do you need an ERN?
As mentioned previously, you’ll need to quote your ERN in all correspondence with HMRC, above all when you complete your annual PAYE return.
If you enter an invalid number or miss out your ERN altogether, you won’t be able to complete your end of year return. Employees can also ask you for an ERN for various reasons, for instance if they are applying for a student loan, or for tax credits (or Universal Credit) while in your employment. You should include the ERN on employees’ payslips.
What if you lose your ERN?
You are likely to need your ERN at various points in any given tax year. If you lose the number, you should be able to find it by checking some previous correspondence from HMRC, provided you haven’t thrown the letters in the bin! The number will also appear on your annual P60 form.
No record of an ERN?
If you’re sure you don’t have a record of your ERN but are presently employing staff, you may have failed to register with HMRC as an employer. If that’s the case, make sure you register as soon as possible or you could face serious consequences.
Some exceptions to PAYE
For the sake of completeness – and these scenarios won’t apply to our contractor readers, you don’t have to register as an employer with HMRC and therefore won’t require an ERN in the following instances:
- If employees are paid as self-employed or are paid by an agency.
- If the employee earns less than £113 a week (current threshold).
- If employees are working as unpaid volunteers.
- If your company is based in the Isle of Man or the Channel Islands.
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