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HMRC internal manual

Compliance Operational Guidance

Alternative rights of recovery (PAYE directions): further action when a direction seems appropriate: codes and ‘tax due’

PAYE failure giving rise to a direction must be based on the code which the employer should have operated for the relevant year. This will be the code issued by HMRC at that time as shown on

  • the taxpayer’s PAYE Service record, but
  • where appropriate, uprated for subsequent Budget changes for the deduction year in question.

Enter the code determined as above in the ‘Code employer should have used’ column of form C500.

If you don’t know what code number was issued in a particular year (for example the PAYE Service record does not hold details of the original code issued), or no code number was issued, then use the code number specified for ‘emergency use’. Where there is evidence of allowances used against another employment, use code BR.

Use the SEES PAYE Calculator on Excel to calculate the tax and, where appropriate, the employees Class 1 NICs due.

In a Regulation 81(4) case:

  • Enter on form C500 the code which should have been operated even if this differs from the code used on form P380D.
  • Use the relevant payments and code details you have entered on form C500 and use the appropriate year’s SEES PAYE Calculator to calculate the ‘Tax and, where appropriate, the employees Class 1 NICs due’.