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HMRC internal manual

PAYE Manual

PAYE operation: PAYE direct payment: when to use PAYE direct payment arrangement

The PAYE Direct Payment arrangement is used where

  • It is established that there is employment income which is assessable


  • There is likely to be tax liability because of the level of the income


  • There is no employer to operate PAYE or it is considered impractical for the employer to operate PAYE


  • The taxpayer is willing and able to operate PAYE correctly on their own income

Before agreeing to PAYE Direct Payment however, you should always consider if it is possible to come to some local arrangement by which PAYE can be operated in the normal wayfor the person involved.

Cases where there is no employer include

  • Those employers to whom the PAYE regulations do not apply, such as overseas employers with no presence in the United Kingdom


  • Embassies of overseas governments employing staff in the UK

You should set up the taxpayer as a self assessment case where

  • You consider an employee is not willing to operate PAYE or not capable of doing it correctly


  • You close down a PAYE Direct Payment case because the taxpayer has failed to operate PAYE correctly