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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: compliance revenue recording: recovery from employees and directors

COG915175 explains the circumstances when recovery of PAYE and NIC under-deducted may be recovered from the employee or director.

Where you follow this settlement route you should consider the compliance revenue involved as follows:

Regulation 72(5) Condition A

(See COG915180)

If a referral has been made to the PAYE Errors Unit and the unit has agreed a direction is appropriate you should score

  • the amount of the tax directed by PEU, and
  • record this under ‘Assmt. after Reg. 72(3) Ruling’ on ECS/Caseflow.

Regulation 72(5) Condition B (COG915185 & LC Memo 14/11)

If a referral has been made and it is agreed a direction is appropriate you should claim

  • the amount of tax directed by either Special Investigations or PAYE Directions team Employment Status & Intermediaries (ES&I), and
  • record this under ‘Assessment. After Reg 72(3) Ruling’ on ECS/Caseflow
  • the amount of any penalty imposed because of the employer’s action (COG914030 - If an Employer or Contractor is relieved of the liability through a direction), and
  • record this on ECS/Caseflow as either

    • a ‘Class 6 settlement’ if the penalty is recovered by a contract settlement, or
    • a ‘Regulation 80 Determination’ if the penalty is recovered by a formal penalty determination.

Note: This compliance revenue will be counted for internal purposes but the tax directed will be discounted for external purposes. This is because the amount of tax will also be scored by Special Investigations/PAYE Direction team.

Regulation 81(4) Condition A or B (COG915185 & LC Memo 14/11)

(See COG915190)

Such a direction will only be considered if amounts (or part amounts) determined under Regulation 80 remain unpaid 30 days after the determination became final and conclusive.

As a claim for compliance revenue once the determination became final and conclusive will already have been scored (COG915630 - Formal Charges), no further compliance revenue is scorable by EC.

However any penalty imposed as a result of the employer’s action (COG914030 - If an Employer or Contractor is relieved of the liability through a direction) can be scored and recorded as indicated above.

Regulation 72F (COG915660)

You can only score compliance revenue as indicated in published guidance for example the net amount recovered from the employer following

  • the direction for tax
  • the informal set-off of Class 2 NIC, and
  • the informal set-off of Class 4 NIC.

Regulation 86, Social Security (Contributions) Regulations 2001

(See COG915195)

Recovery of primary NIC from an individual will be considered at the same time as a direction for the tax involved.

Note: Compliance revenue can also be scored in the circumstances indicated above.