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HMRC internal manual

Debt Management and Banking Manual

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HM Revenue & Customs
Updated
, see all updates

Debt and return pursuit: PAYE: introduction to PAYE: PAYE schemes and types

When an employer or contractor, who is required to operate PAYE and/or CIS contacts the New Employer Helpline by phone or by email to request a new PAYE scheme, a new record is opened on our computer systems reflecting the scheme type they will operate.

The details are captured on to EBS (Employer Business Service) and a new Employer reference and Accounts Office reference will be generated by EBS.

If the employer intends to pay benefits/expenses, this information is passed to ECS (Employer Compliance System) in anticipation of the P11D(b) and Class 1A Charge.

Prior to RTI (Real Time Information), once an employer or contractor record was opened on EBS and an Accounts Office reference allocated, a BROCS (Business Review of the Collection Service) record was subsequently created.

From 15 October 2012, BROCS is no longer responsible for the PAYE and NIC accounting of employers who have an RTI starting date in 2012-13 onwards. From this date, all accounting records for RTI employers were transferred from BROCS to the Enterprise Tax Management Platform (ETMP).

From 5 November 2012, all customers registering as new employers joined RTI and have their accounting records dealt with through ETMP.

All remaining employers, with a few exceptions, joined RTI in April 2013 and their accounting records were transferred from BROCS to ETMP.

Scheme type ‘P’ (code 70)

This scheme is for employers who have employees who are liable for deductions of Tax and NIC.

Further information can be found at PAYE20135.

P Type Schemes can also include payment card reward schemes and pseudo schemes.

Payment card reward schemes

A payment card company, bank or building society to tax payments of cash made to an employee or third party retailer who passes this onto their employee as a reward for the recovery of a lost or stolen credit or bank card sets these up.

Tax is deducted at basic rate, and no NICs are payable.

There is no requirement to complete forms P14, P45 or P46 as the employer gives the recipient a statement of tax deducted.

Payments are paid over to HMRC in the normal way.

Further information can be found at PAYE20065.

Pseudo schemes

These are set up to register an Employer Compliance Review or inspection of an employer who has no PAYE scheme. The scheme is cancelled the day after it is opened. BROCS and/or ETMP will not show that this is a Pseudo scheme, but EBS notes will.

From 1 April 2009, Pseudo schemes can also be set up to handle penalties raised on employers who are not paying their employees the National Minimum Wage. The penalty charge will be raised on the SAFE system, but a PAYE record is needed to deal with the accounting.

Further information can be found at PAYE20070.

Scheme type ‘NI’ (code 70)

This scheme is for employers who make payments to employees that are liable only to primary and secondary NIC (primary being the employee’s share and secondary being the employer’s share). The employer is responsible for setting up the scheme and paying over the NIC deductions to HMRC. If the employee has UK tax liability, this will be paid through Self Assessment, or a DPGEN scheme.

More information can be found at PAYE20120.

Scheme type ‘OCPN’ (code 70)

This scheme is set up when an occupational pension provider makes pension payments to either former employees, or the dependents of deceased employees.

Further information can be found at PAYE20130.

Scheme type ‘XP’ (code 71)

This scheme is for contractors who do not have any employees but make payments to a subcontractor.

The contractor is responsible for deciding whether the subcontractor is self employed or is an employee liable for tax and NIC.

The contractor should also inspect the subcontractor’s certificate or registration card to see how he/she should be treated for tax purposes.

XP schemes will not be brought into RTI.

Further information can be found at PAYE20165.

Scheme type ‘PSC’ (code 72)

This scheme should be used when a contractor in the construction industry makes payments to a subcontractor, and they are also an employer with employees liable to tax and NIC deductions.

They may also provide benefits and expenses to their employees that are liable to Class 1A NICs.

Further information can be found at PAYE20140.

Scheme type ‘DOME’ (code 74)

This scheme was used prior to 5 April 2012, and was also known as a ‘Q’ or Simplified Deduction Scheme. It was set up for employers of personal or domestic employees at their home; for example, nannies, cooks and gardeners.

A DOME scheme was also used for individuals employed to assist an individual with disabilities in their work or study, which the individual would not have been able to carry out without their assistance.

From 6 April 2012, these employers are set up under a P scheme, and are expected to operate a normal PAYE payroll and file online.

From 6 April 2013, all DOME schemes were converted to P schemes with the exception of Segmentation Band 5s (Religious Exemption and Care and Support). They will continue to file using paper forms P12 and P37.

From 2014-15, all remaining DOME schemes will be changed to P schemes, and will be brought into RTI. If they are a care and support employer who has appealed against submitting online, they will be able to submit paper RTI submissions quarterly.

Further information can be found at PAYE20085.

Scheme type ‘TRONC’ (code 75)

If tips are given, in a restaurant or bar for example, tax has to be deducted. The way this is done depends upon the arrangements the employer makes. This can be done in two ways; either the employees:

  • keep the tips themselves and Customer Operations will adjust the employee’s Tax Code accordingly
  • decide to pool their tips, in which case a TRONC scheme should be set up.

A PAYE record, known as a TRONC scheme will be opened in the name of an individual (for example, the head waiter) known as a Troncmaster, showing the place of business.

If a Troncmaster fails or refuses to operate PAYE correctly, then the case should be reported to:

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Further information can be found at PAYE20160.

Scheme type ‘DPGEN’ (code 76)

This scheme is set up for employees who are responsible for calculation and payment of their own tax. Payments are due quarterly irrespective of the amount of tax due, and it is the employee who is responsible for paying over the tax that has been deducted.

DPGEN employees can include Roman Catholic priests and Clergy of the Church of Ireland. It can also include Officials whose earnings are made up of fees paid by the public; for example, registrars.

Further information can be found at PAYE20095.

Scheme type ‘DPNI’ (code 76/77)

A DP scheme is set up for employees who are responsible for calculation and payment of their own Tax and NIC. Payments are due quarterly irrespective of the amounts due.

DP cases are used where the normal PAYE procedures are unsuitable and the employee can be relied upon to use the Tax tables to work out their own tax and make the payments as and when they fall due.

DP employees can include Roman Catholic priests, Registrars, Church of Ireland Clergy and certain employees of foreign and Commonwealth governments, such as a British chauffeur on the staff of a foreign embassy.

Further information can be found at PAYE20100.

Scheme type ‘DCNI’ (code 77)

A DCNI scheme is set up for employees who are responsible for calculation and payment of their own NIC contributions only. Payments are due quarterly irrespective of the amount of NIC due, and any tax is collected under Self Assessment.

DCNI cases can include employees who have earnings from short periods of employment with different employers, for example dock and market workers, no ‘employer’ for PAYE purposes and cannot be dealt with under a DPNI scheme, certain members of the reserve and auxiliary forces who receive taxable bounties and pensioners whose NI retirement or widow’s pension cannot be coded in or covered by personal allowances. They can also include employees that have been previously dealt with under a DPNI scheme and where these arrangements have had to be cancelled.

Further information can be found at PAYE20090.

Scheme type ‘EXAM’ (code 78)

An EXAM scheme is set up when fees are paid to individuals involved in any duties connected with GCSE and A level examinations conducted by the various examining boards, or examiners, invigilators and settlers involved with first degree exams conducted by universities.

When operating an EXAM scheme Class 1 NIC is not due, forms P45, P46 and P60 are not issued, tax is not deducted from payments made to an examiner who declares on form P524 that they are not liable to tax and tax is deducted at basic rate from all other payments.

Payments made to external examiners engaged by universities for masters degrees and doctorates are generally dealt with under SA procedures.

Further information can be found at PAYE20115.

Scheme type ‘NORPRO’ (code 79)

Formerly known as the Norwegian Protocol, an Offshore Protocol scheme is set up when an Employer is resident in a country that has an Offshore Article in their Double Taxation Treaty with the UK.

The foreign employer operates a special system of UK tax deductions using simplified tax tables that are supplied by the PAYE Employer Office.

These schemes will not be eligible to join RTI at any time.

Further information can be found at PAYE20125.

Scheme type ‘ELECT’ (code 95)

An ELECT scheme is set up when councils and local authorities make payments to individuals in respect of electoral duties. These individuals include the returning officer, acting returning officer, presiding officer, polling clerks, counting assistants and all others engaged in the conduct of public elections and referenda.

For PAYE purposes, the employer is the acting returning officer or their deputy.

When an election is called, the acting returning officer will notify HMRC of the date and type of election, and deduct tax from payments made. Class 1 NIC is not due.

Electoral registration officers are not dealt with under an ELECT scheme but under the local authority’s normal PAYE scheme.

Further information can be found at PAYE20105.

Scheme type ‘TAS’ (code 96)

A Taxed Award Scheme is set up when a third party provides non-cash vouchers or benefits to employees of others, and the direct employer does not arrange or facilitate the provision.

The third party will be liable to Class 1A NIC on the value of the vouchers and benefits in kind provided, and on any employee’s tax bill that they meet.

TAS schemes will not be eligible to join RTI at any time.

These schemes are now opened and run at HMRC Incentive Award Unit.

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Further information can be found at PAYE20155.

Scheme type ‘EPA’ (code 97)

An EPA scheme is set up and closed on instructions from the Debt Management Office.

The scheme is set up when payments are made to employees of companies in receivership; for example, holiday pay or arrears of pay arising before the receivership took place. The receiver is required to deduct tax and NIC from these payments, and pay the amounts over to HMRC.

Further information can be found at PAYE20110.

Scheme type ‘PSS’ (code 98)

A PSS scheme is appropriate when the trustees of a profit-sharing scheme make a payment on behalf of an employer in respect of shares given by that employer to its employees, and the recipient shareholders are now either employees of that employer or pensioners receiving an occupational pension from that employer.

The trustees are required to deduct tax from these payments under PAYE using code BR.

These were set up to record deductions from employee’s pay which varies in line with the profits of a business in which the employer worked. Tax relief was given to users of this scheme but the relief was phased out, and from 1 January 2000, tax relief was no longer available.

New PRP schemes are not being set up, and any tax and NIC is accounted for through the employer’s PAYE scheme.

Scheme type ‘SICK’ (code 98)

These scheme types were used when a third party was responsible for paying sick pay to the employees of more than one employer, for example, an insurance company.

No taxpayer records were held for these employer records and tax was deducted at basic rate.

No new SICK schemes will be set up with a start date after 5 April 2013. Any scheme types that are live as of 6 April 2013 will be changed to scheme type P for 2013-14 onwards.