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HMRC internal manual

Compliance Operational Guidance

HM Revenue & Customs
, see all updates

Supporting Guidance: employer compliance: guidance by subject: compliance revenue recording: failure to operate - closed years and/or closed tax periods

Where an employer has made payments to employees but has failed to operate PAYE and/or NIC you should

  • calculate and pursue the underpayment for closed years (up to and including 2012-13) in all cases (subject to the criteria at COG906090 - Extending the Compliance Check)
  • from 6 April 2013, for closed years, instruct the employer to submit the correct information on an Earlier Year Update (EYU), see COG904240 
  • from 6 April 2013, for closed tax periods in the current year, instruct the employer to submit the correct information on the next Full Payment Submission (FPS), see COG904240 
  • consider any claims for relief under Regulation 72F

    • calculate and pursue interest
    • consider penalties (COG914045, COG914050) where no return has been submitted or (COG914070) if an incorrect return has been submitted
    • calculate a current year adjustment as in COG906590 
    • record the full amount of compliance revenue (net if a Regulation 72F direction is made (COG915660 - Status), including interest and penalties on Caseflow).
    • notify NIC&EO of any amounts to be allocated as ‘treated as paid’ against the employees’ NI account (NIM12112).

Where recovery for closed years is not appropriate you should

  • instruct the employer to correct current year records by reporting the correct year to date pay and deductions on the next FPS
  • calculate a current year adjustment (COG906590- Caseflow How to calculate current year liability)
  • consider Future Revenue Benefit (COG915640)
  • record the amount of the current year adjustment and Future Revenue Benefit if appropriate on the relevant IT systems.

Where an inaccuracy is identified and the year or years are still open you should