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HMRC internal manual

Compliance Operational Guidance

HM Revenue & Customs
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Alternative rights of recovery (PAYE directions): general: regulation 81(4) condition A or B - provisions

Regulation 81 of the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682) provides

“Employee liability if tax unpaid after regulation 80 determination


  1. This regulation applies if—

a.     any part of the tax determined under regulation 80 is not paid within 30 days from the date on which the determination became final and conclusive, and

b.     condition A or B is met in relation to an employee.

2.     Condition A is that HMRC is of the opinion that the employee in respect of whose relevant payments the determination was made has received those payments knowing that the employer has wilfully failed to deduct the amount of tax which should have been deducted from those payments.

3.     Condition B is that the unpaid tax represents an amount for which the employer was required to account under regulation 62(5) (notional payments) in relation to a notional payment to the employee.

4.     HMRC may direct that the employer is not liable to pay the amount of tax which appears to them should have been but was not—

a.     deducted on making those relevant payments, or

b.     accounted for under regulation 62(5).

5.     If a direction is made, the amount of tax must not be added under regulation 185(5) or 188(3)(a) (adjustments for self-assessments and other assessments) in relation to the employee.

6.     Tax payable by an employee as a result of a direction carries interest, as if it were unpaid tax due from an employer, in accordance with regulation 82 (interest on tax overdue).

7.     The tax payable carries interest from the reckonable date until whichever is the earlier of

a.     the date on which payment is made, or

b.     the date (if any) immediately before the date on which it begins to carry interest under section 86 of TMA.”