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HMRC internal manual

Compliance Operational Guidance

From
HM Revenue & Customs
Updated
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Supporting guidance: employer compliance guidance by subject: penalties: simplified schemes - pre April 2009

You may encounter Domestic or simplified deduction schemes that cover a number of situations that are explained in the PAYE Manual as follows:

  • DOME (PAYE20085)
  • DCNI (PAYE20090)
  • DPGEN (PAYE20095)
  • DPNI (PAYE20100)
  • ELECT (PAYE20105)
  • EPA (PAYE20110)
  • EXAM (PAYE20115)
  • TAS (PAYE20155)
  • PSS (PAYE20145) (where the return is received before 30 June).

Simplified Schemes

Regulation 34 of the Income Tax (Pay As You Earn) Regulations 2003 allows HMRC to authorise a simplified scheme.

Regulation 35 specifies the records to be kept and the return required to be filed before the 20th May.

Regulation 35(7) states that the return is treated for the purposes of the regulations as the return required by regulation 73(1) (annual return of relevant payments liable to deduction of tax).

Regulation 73(10) provides for the application of Section 98A of TMA 1970 penalties (Sch 24 FA 2007 for returns due to be filed from 1st April 2009) in relation to regulation 73(1).

Direct Collection and Special Arrangement Schemes

Regulation 141(1) of the Income Tax (Pay As You Earn) Regulations allows HMRC to make special arrangements for the collection of tax in respect of PAYE income of any employees.

Regulation 142(1) allows HMRC to issue a deductions working sheet to an employee providing specific information and the year to which the deduction working sheets relate.

Where this happens the employee has 30 days in which to object to the use of the direct collection procedure. If such an objection is received HMRC can not enforce the procedure and any tax becomes recoverable under self-assessment (PAYE75010).

If no objection is received within 30 days it can be assumed that the employee has agreed to operate PAYE on any relevant payments. In such circumstances Regulation 145(1) requires the employee to send a return to HMRC without unreasonable delay when relevant payments cease otherwise Regulation 146(1) requires the employee to make a return before the 20th May following the end of the tax year.

Regulation 146(5) provides for the application of Section 98A of TMA 1970 (Sch 24 FA 2007 for returns due to be filed from 1st April 2009) penalties in relation to regulation 146(1).

Normal PAYE recovery procedures can apply but the employee’s SA position should always be checked before considering any enforcing action.

In NI only cases

Employees are responsible for deducting their own Primary Contributions by virtue of Paragraphs 30 and 31 of Schedule 4 of the Social Security (Contributions) Regulations 2001. See NIM01015.

Sub-section (6) of paragraph 31 of Schedule 4 requires a return to be made if the employee ceases to receive earnings.

Sub-section (7) of paragraph 31 of Schedule 4 requires a return to be made 44 days after the year end for example the normal filing date for an EOY return.

Sub-section (8) of paragraph 31 of Schedule 4 provides for the application of S98A of TMA 1970 penalties (Sch 24 FA 2007 for returns due to be filed from 1st April 2009) in cases of failure in sub-sections (6) and (7).

Penalties

PAYE51025 state that these schemes will be excluded from EOY penalties.

It is the view of TAA that penalties for failure to make returns (COG914045 and COG914050) and penalties for submitting the returns with inaccuracies (COG914070) are appropriate and should be applied in certain circumstances.

In view of the exclusions mentioned in the guidance above any case with a potential penalty situation must be discussed with TAA Technical prior to any discussion of penalties with the employer, also see COG904770.