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HMRC internal manual

PAYE Manual

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HM Revenue & Customs
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Employer returns: regulation 80 determinations: requests for equitable treatment

Before the determination becomes final and conclusive, the employer may ask you to accept a lower equitable tax figure. An employee who is the subject of a Regulation 81(4) direction (PAYE54210) may make the same request. Treat any such request as an appeal.

The reduced tax figure may be

  • Based on codes which include allowances now claimed but which the Processing Office did not include in the code sent to the employer
  • Considered to be equal to the theoretical underpayment arising from an employee’s self assessment (arrived at by assuming all the earnings are assessed and the PAYE tax credits are withheld from the assessment)

Do not agree, under any circumstances, to the request if the employer has actually deducted the tax determined but failed to pay it to HMRC. Nor should you reveal any confidential information about an employee’s tax affairs unless their consent has been provided.

If the employee has not suffered the tax determined you should consider the case as a whole. Consider for example the following points

  • Is any PAYE tax for later years unpaid?
  • Could a code the employer has used include allowances that may not be due?
  • Has the employer a history of failure to operate PAYE correctly?

If, you are unwilling to accept a reduced tax figure in settlement and there is no prospect that you and the employer are going to reach an agreement, you will need to write to the employer, giving your view of the matter and offering him a review (see ARTG4220). If the employer accepts, you will need to be ready to explain your decision to the review team or, if the employer notifies his appeal to the Tribunal you will need to be ready to defend the full charge before the Tribunal.

If you can accept the lower tax figure, settle the appeal on this basis. Only do so if

  • The lower amount of tax is at least the amount of tax due on the personal assessment
  • The personal assessment is full and complete in all respects
  • See PAYE54200 if the employer sends form P35 or Final Payment Summary for the employees showing the lower tax figure
  • See PAYE54205 if a request for equitable treatment arrives after the determination has become final