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HMRC internal manual

Self Assessment Manual

HM Revenue & Customs
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Transfer of liability: regulations 72/81 and SA: regulation 81(4) direction

In the absence of payment of a Regulation 80 determination, the PAYE Directions Unit (PDU) may give a Regulation 81(4) condition A or B direction, to remove liability from the employer. The effect of this is that the tax is payable by the individual Directors / employees named in the determination. By virtue of Regulations 81(6) & (7) the tax payable carries interest from 19 April following the end of the relevant year until the earlier of

  • The date of payment, or
  • The date on which Section 86 interest becomes chargeableThe PDU will advise the Director / employee that a Regulation 81(4) direction is being considered, and will invite any representation that they wish to be taken into account.

The PDU decision will be notified in writing to the

  • Employers Section in the office with processing responsibility
  • Director / employee, who has a right of appeal against the direction to the Appeal Commissioners
  • Any agent actingWhen a Regulation 81(4) direction is made, the Regulation 80(2) tax is remitted. Any credit given in the calculation of liability for the individual taxpayers must be restricted to the tax actually suffered or any amount specified by the PDU as being paid by the employer.

Practical use of Regulation 81(4)

In practice Regulation 81(4) is used mainly in Director cases and where there is little or no prospect of recovering the tax from the company. Prospects of recovery are considered poor where, for example, the company is insolvent or has ceased trading for whatever reason.

If the company is still in existence and still trading, Regulation 81(4) is not usually considered.