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HMRC internal manual

Debt Management and Banking Manual

Debt and return pursuit: PAYE: e-payment surcharge: in-year cessations

When an employer ceases the normal process is to establish as early as possible if there is any shortfall of payment against the cessation return and attempt to recovery this ahead of the return being processed at the end of the tax-year.

Where the employer is a large employer and they have a current default count and are subject to a current surcharge period then in addition the DMEU will establish if a surcharge is due and recover this with any shortfall of PAYE and NIC.

Firstly you will need to establish the charge figure on the return. To access the employer’s details

  • input the employers “empref” which can be found on BROCS VIEW TAXPAYER (format 1) then
  • view e-service Filestore and
  • take the net charge due from the employer from the form P35 (box 27 “net figure for the year less box 31) and
  • use the surcharge calculation to calculate the surcharge.

Exceptionally a large employer may not have e filed the return. In that case

  • take the figures from the form P35
  • obtain the following information from BROCS

    • the number of employer defaults in the current deduction year use BROCS VIEW TAXPAYER DG (format 9 for CY only)
    • the number of defaults previous to CY but within the current surcharge period BROCS VIEW TAXPAYER DG (format 8, no year specified less CY defaults above).

When you have calculated the surcharge, issue the notice clerically.

Cessation P35 charge

Below is an example of a suggested BROCS action history note for a 2007/08 cessation recorded on BROCS the same day as the surcharge notice was issued:

“Surcharge Notice issued for £500.00, default count at end of 2006/07 = 0, 4 defaults in 2007/08 and total % used of 0.34 (0+0+0.17+0.17), £1,500,000 P35 charge”.

Use IDMS function AMEND WORK ITEM to establish the debt against the last month held on IDMS to reflect any underpayment and surcharge (the surcharge amount should be recorded as TAX) and note IDMS TP Notes and Assets that

  • a surcharge has been raised and
  • refer to the BROCS action history note.

After the expiry of the 30-day appeal period

  • issue the demand notes clerically to the employer for any arising underpayment and
  • follow up as normal.

Action after the 19th April following date of cessation

  • Use BROCS VIEW TAXPAYER ASA AS (format 2) to raise a surcharge to reconcile the employer’s payment record on BROCS.