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HMRC internal manual

PAYE Manual

HM Revenue & Customs
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Employer returns: regulation 80 determinations: PAYE failure spans several years: what you might do instead

The alternative is to consider whether it is wise to impose this heavy penalty on the employer. If you can avoid the burden to the employer of large arrears, limit your action. But only do this in worthy cases. A higher officer may choose how far to apply this treatment.

If you decide on this course, discuss in advance with the employer or agent. Make clear the line you will take if the Tribunal supports your view on appeal. You can forgo past tax arrears on these payments subject to the following conditions

  • The concession applies only to that case and the payments in question
  • The employer will apply PAYE to the payments in future
  • You reserve HMRC rights of recovery

With an understanding on these lines make a determination only

  • For the latest year of PAYE failure
  • In a nominal sum of tax on payments for perhaps one month
  • As an exception if needed, on payments to a chosen employee

You can then treat this as a test case. Reaching agreement to charge PAYE tax from a specific date does not give you the right to seek unpaid tax for earlier years from individuals by personal assessment. You may be able to obtain payment but a DMO has no legal recourse to recovery action if payment is not made.

In coming to a decision not to pursue an employer for earlier years PAYE tax; you must be prepared to write off the tax which is strictly due from the employer. That is unless PAYE Errors Unit is able to make a direction under Regulation 72(5) Condition A.