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HMRC internal manual

PAYE Manual

HM Revenue & Customs
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Employer returns: employer return - overpayments: overpayments during a trade dispute

The following subject is presented as follows



A trade dispute between an employer and their employees will normally mean that the employees do not receive any pay for the duration of the dispute.

An employer must decide if an employee is involved in a trade dispute, but advice is available where required from

  • Their local Employment Service Job Centre (ESJC). The ESJC will also handle any appeal from the employee

Or, in Northern Ireland

  • Their Social Security Office

If PAYE continued to be operated for the period when no pay was received, the employee in most cases would be due a refund of tax.

An employer however must not make current year refunds to employees involved in a trade dispute (except in the case of a refund authorised on form P48) and similarly the Processing Office who is responsible for the employees’ taxpayer record does not have authority to make the refund either. The employer must instead perform the normal PAYE calculation on each pay day and

  • If tax is deductible, deduct it as usual

Or, if a refund is due

  • Wait until one of the following occurs

    • The employee returns to work
    • The employment ends


    • The employee dies

Any refund held back may be

  • Set against tax due, leaving only a net amount to be deducted


  • Refunded later

Note: ‘Employees involved in a trade dispute’ may include employees

  • Participating in the trade dispute
  • Laid off employees who have a direct interest in it
  • Employees who fall sick after the dispute starts

Appeal from the employee

An employee who disagrees with the employer’s decision to suspend PAYE refunds may appeal to the ESJC.

The ESJC may

  • Rule that the trade dispute does not disqualify the employee from receiving unemployment benefit


  • Provide written confirmation of their decision

On receiving written confirmation of the ESJC’s decision the employer must 

  • Act as though the employee is working normally
  • Make any refund accrued to date
  • Make any future refunds as they arise

Employer unable to make refund at due time

For information on this see ‘Trade dispute: refund not made at due time’ at PAYE47120.

Trade dispute continues into following year

Where a trade dispute continues into the next tax year the employer must 

  • Carry out the final PAYE calculation for the closing year in the normal way
  • Continue to withhold all net refunds due to employees involved in the dispute until it ends or the employee leaves or dies
  • Complete the return (P35, P14s and P60s as if the withheld refunds had actually been made)
  • Give each employee a statement of the amount of tax refund withheld either

    • On a form P61


    • On form P60 accompanied by a form P62 which gives an explanation

You must

  • Find out from the employer how much of the PAYE tax overpaid relates to tax refunds withheld from employees which is still not properly repayable
  • Ensure this amount is not repaid, reallocated to the next tax year or transferred until the dispute ends

If the employer does request repayment, reallocation or transfer then any other part of the overpayment (not affected by the trade dispute) can be disposed of in the normal way.