This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: settlement: direction under regulation 72F: effect of a direction on the employee

The employee will not have to pay additional tax as a consequence of a direction under Regulation 72F. This is because one of the principal conditions before making a direction is that the tax in question has already been assessed as being payable under SA by the employee. A direction is not appropriate if it would increase the amount of tax payable by an individual under self-assessment.

However, if a higher rate employee has not returned the relevant payments in full and we are recovering tax from the employer using code BR, additional tax may be payable by the employee under SA.

The main effect of the direction as far as the employee is concerned will be

  • to restrict the employee’s ability to claim a PAYE credit for the tax specified in the direction notice, or
  • where the notice sent to the employee does not specify an amount of tax, to restrict the PAYE credit in respect of any relevant payments from the employment specified in the notice for which the employer ought to have deducted tax.

This is because the amendments to the PAYE Regulations from 6 April 2008 include a change to Regulation 185 to make sure that tax which is subject to a direction under Regulation 72F cannot be included in an adjustment to tax treated as deducted in a self-assessment.

Where sampling has been used and the direction notice only specifies the employment in respect of which the relevant payment was received, if an employee

  • appeals against the direction
  • attempts to include tax the employer ought to have deducted as an adjustment under Regulation 185, or 
  • makes an overpayment relief claim under Schedule 1AB TMA 1970 which includes an adjustment for a PAYE credit in relation to the relevant payment for which the direction was made

HMRC can issue a further direction notice specifying the amount actually paid by that employee.