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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: settlement: direction under regulation 72(5) condition A

Employers are responsible for the correct operation of PAYE and normally will be held responsible for any failures.

An employer who

  • fails to deduct or
  • under-deducts

PAYE from an employee is liable for the tax underpaid.

By making a direction under Regulation 72(5) Condition A, the PAYE Errors Unit (PEU) can relieve the employer of liability. Effectively the liability is transferred to the employee.

To do this the PEU must be satisfied that the employer

  • took reasonable care to comply with the PAYE Regulations and
  • the failure to deduct the correct amount of tax was due to an error made in good faith.

More information can be found in the PAYE Manual at PAYE92050.

Action by Caseworker

If an employer asks for, or you consider a direction under Regulation 72(5) Condition A is appropriate, you should

  • not resist the claim
  • remember that the employer does not have to mention the actual Regulation or specifically claim relief for a direction to be considered
  • provide a full explanation as to how the error occurred by establishing all the relevant facts about how the under-deduction occurred
  • advise the employer that the matter will be reported to the PEU for consideration.

Note: You must not give any opinion on whether a direction will be made.

A copy of the relevant papers and a summary of the facts should be referred to PAYE Errors Unit using the 

Filesubmissions template .

Submissions can be sent via  email or via post to

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Room WP1104

Waterview Park

District 15


Tyne & Wear

NE38 8QG


(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Penalties for incorrect returns See COG914025 

Claiming Compliance Revenue See COG915690