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HMRC internal manual

Compliance Operational Guidance

HM Revenue & Customs
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Supporting Guidance: employer compliance: guidance by subject: free of tax payments: FOT system applicable but not used

Where the employer has made ‘net’ Free of Tax (FOT) payments and the FOT system is applicable but has not been operated (COG913010) you should

  • explain the obligations of an employer operating a FOT arrangement as outlined atPAYE20035 
  • arrange for a FOT package to be sent to the employerPAYE20035, or
  • alternatively advise employer to apply for a FOT package online via the HMRC Internet site
  • explain to the employer how to make the necessary open year adjustment, and
  • seek recovery for closed years

    • using Tax Table G

To determine the NICs due, you should

  • calculate the true gross pay by adding

    • the amount actually paid to the employee, and
    • the ‘tax payable’ as computed above
  • then calculate NIC on the true gross pay.

When computing the total underpayment

  • take into account any tax and NIC already paid by the employer.