SAM142070 - 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 Team may authorise the use of 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) and (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 chargeable
The PAYE Directions Team will consider authorizing a Regulation 81(4) direction if the regulatory tests are met (see COG915190).
When considering a Regulation 81(4) direction, you should make advanced contact with the PAYE Directions Team (see COG915200).
When 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 PAYE Directions Team 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.