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HMRC internal manual

Compliance Operational Guidance

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HM Revenue & Customs
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Supporting Guidance: employer compliance: guidance by subject: settlement: direction under regulation 72F: legislation

The Income Tax (Pay As You Earn) (Amendment) Regulations 2008 SI 2008 No.782

These Regulations amend the Income Tax (Pay As You Earn) Regulations 2003 from 6 April 2008. They extend the limited circumstances where HMRC may make a direction to remove an outstanding PAYE liability from an employer and prevent an employee claiming credit for tax the employer failed to deduct where

  • the employee received a payment from which the employer should have deducted or accounted for tax under PAYE and failed to do so and

    • tax on that payment has been included in the employee’s SA as income tax, or
    • no SA has been made but tax has been paid as SA payments on account of income tax, or
    • tax has been deducted as a subcontractor deduction.

The three new Regulations inserted in the PAYE Regulations 2003 are as follows:

  • 72E - sets out the conditions when a direction can be made
  • 72F - is the power to make a direction
  • 72G - deals with employee appeals.

For the purposes of these regulations

  • payment is a relevant payment as defined at Regulation 4 of the PAYE Regulations. Broadly this means any payment on which PAYE should have been operated including notional payments but excluding non cash vouchers and credit tokens in accordance with Regulation 4 (2).
  • tax is self-assessed if it is included in a return under section 8 of TMA which includes a self-assessment and ignoring any relevant credit, the tax is or would be assessed as payable by way of income tax - see Regulation 72E(7)

Note: the tax has to be payable by way of income tax and so if any other type of tax is assessed as payable (for example capital gains tax) it has not been self-assessed for the purpose of these regulations.

The Income Tax (Pay As You Earn) and the Income Tax (Construction Industry Scheme) (Amendment) Regulations 2014 SI 2014 No.472

These Regulations amend the Income Tax (Pay As You Earn) Regulations 2003 and the Income Tax (Construction Industry Scheme) Regulations 2005 from 6 April 2014 as follows:

  • Regulation 72E(a) and (b) – so a direction can be made where it appears that an amount intended to represent tax on the relevant payment is likely to have been self-assessed as income tax by one or more employees, and
  • Regulation 72F – so the direction notice can either

    • state the amount or amounts of tax that have been self-assessed as income tax on the relevant payment or payments, or
    • the employment in respect of which the relevant payments were received and in respect of which income tax was likely to have been self-assessed.

The amendments have been made to reduce the administrative burden on both HMRC and the employer when considering directions for large employers involving large numbers of employees.