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HMRC internal manual

PAYE Manual

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HM Revenue & Customs
Updated
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PAYE operation: simplified deduction schemes: K code appropriate

Note: DOME schemes became standard P schemes from 6 April 2014. This guidance refers to all years up to and including 2013-14.

K codes cannot be operated within a simplified deduction scheme. Your manager should examine the case and decide whether to withdraw the simplified deduction scheme arrangements and replace them by the normal PAYE system.

Your manager will want to take account of all the circumstances, including any anticipated problems in securing the operation of full PAYE by the employer. It may be that experience of the employer indicates they are unlikely to comply with the requirement to operate full PAYE. In this case it may be inappropriate to make such a proposal, as withdrawing the simplified deduction scheme arrangements would lead to unnecessary difficulties.

Simplified deduction scheme arrangements withdrawn

If your manager decides that the simplified deduction scheme arrangements are to be withdrawn

  • Write to the employer

    • Explain that a K code is required for one of his or her employees and for that reason simplified PAYE is no longer appropriate
    • Propose that the employer operates full PAYE from the following 6 April, offering a broad explanation of what that entails and, wherever practical, offer the assistance of the Business Support Team (BST), to explain how to operate PAYE
    • Ask for the employer’s agreement to that proposal within (say) 30 days

If the employer agrees

  • Advise the Employer section to change the scheme type from ‘DOME’ to P’ on the following 6 April
  • The Employer section will follow ‘Change scheme type - DOME to P (Action Guide)’ at PAYE27027 

If the employer disagrees and his or her objection is accepted

  • Write to the employee involved to explain that

    • A K code cannot be operated by his or her employer and consequently he or she will remain on code 0T while present circumstances prevail
    • It will be necessary for him or her (the individual) to self assess and to pay any balancing payment (underpayment) direct to Banking Operations
  • Pass the papers to the Self Assessment team, to bring the individual into self assessment