From 6 April 2011, there was a change in the legislation affecting all payments of employment income that are paid post-termination and issue of form P45. Up to 5 April 2011, the tax code to use against such payments was BR; from 6 April 2011 it was changed to code 0T.

This change led to objections from share scheme administrators who said they would experience difficulties in applying code 0T to taxable share scheme income arising after an employee's termination. HMRC accepted this and the legislation was changed so that, from 6 April 2011, normal post-termination payments were taxed using code 0T (a progressive tax rate which deducts tax at the basic, higher, and additional rates); but share-related income continued to be taxed at BR (a flat 20%).

However, there remained the problem of what tax code should be entered in payroll records when a post-termination payment includes both share-related income and other income? Payroll software is not built to allow for the operation of more than one tax code in the same pay period. And payroll software developers stated they were totally unable to do anything to modify their software for 2011/12, and would be hard pushed to effect any changes for 2012/13.

Therefore, on 19 January 2012, HMRC published draft Regulations for consultation asking for comments to be made by 16 February. The draft Regulations omit any difference in the tax code that must be used from 6 April 2012 onwards when someone receives a post-termination payment. Whatever the type of income, the tax code to use is 0T; code BR should no longer be used when taxing post-termination share-related income. This change will align all post-termination earnings under the same tax code.