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HMRC internal manual

PAYE Manual

PAYE operation: employment and support allowance: DWP action

The Department for Work and Pensions (DWP) will operate a modified form of PAYE on Employment and Support Allowance (ESA), which will be paid without deduction of tax.

DWP will calculate and make a repayment of tax, if one is due, at the end of the ESA claim or at the following 5 April if the claim is still live.

When someone makes a claim for ESA, Job Centre Plus will ask them for Parts 2 and 3 of form P45 given to them by any previous employer.

Where the claimant produces form P45, the details are put on the DWP JSAPS system and the same tax discrepancy checks that an employer would make are carried out. For more information see PAYE62020.

DWP will use a P45(3)SUBS or a TIS (an electronic version of P46U) to notify HMRC of the start of a claim to ESA (see PAYE67015 for how this works in JSA cases). The PAYE Service will be able to differentiate between JSA and ESA cases sent across the DWP JSAPS system by means of a dedicated PAYE reference set up for ESA cases. (This content has been withheld because of exemptions in the Freedom of Information Act 2000) .

Like IB, ESA will attract Class 1 National Insurance (NI) credits.

For guidance regarding IB to ESA reassessment, see PAYE77210.