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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: net pay arrangements: deductions from gross pay before tax

Employers may recover money due from their employees by making deductions from their wages. PAYE should be operated on the gross pay unless the deduction is confined to one of the following net payment arrangements

  • (from 6 April 2017) optional remuneration arrangement (OpRA) where an “excluded exemption” applies to the benefit provided.  See EIM44131
  • a successful salary sacrifice (up to 5 April 2017 unless subject to OpRA transitional rules EIM44030). See EIM42750
  • payroll giving scheme COG913520
  • approved or registered pension schemes. See PTM044230 onwards.

If the employer has incorrectly operated PAYE on a net pay figure you should

  • explain that the gross pay figures should be taxed
  • explain how to make any necessary open year adjustments COG906520 and
  • extend the compliance check where the criteria at COG906090 are satisfied.