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HMRC internal manual

Compliance Operational Guidance

HM Revenue & Customs
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Supporting Guidance: employer compliance: guidance by subject: settlement: direction under regulation 72F: miscellaneous employer and employee issues

Cases where the employer is not responsible for operating PAYE

An employer without a UK tax presence is not responsible for the operation of PAYE. For further information on the meaning of a UK ‘tax presence’, see PAYE81610.

Section 689 ITEPA provides measures which enable HMRC to require someone who is not the employer of an employee, but for whom the employee works, to account for PAYE on that employee’s earnings.

This requirement applies automatically if the PAYE regulations do not apply to both the actual employer and, if different, the person who pays the employee (unless the payer operates PAYE regardless).

Although an individual must always include employment income on the relevant pages of his SA return he has no entitlement under Regulation 185 unless his employer or the entity for which he works was required to operate PAYE.

Earnings paid to someone other than the employee

A direction can only be made if an individual has self-assessed the relevant income under Section 9 of the Taxes Management Act 1970 (personal return).

Where earnings are paid to someone other than the employee, for example a limited company, a direction cannot be made. Unless Extra Statutory Concession A37 applies (EIM02500) the tax and NICs must be recovered from the employer in full.