ECH21011 - Penalties: If an Employer or Contractor is relieved of the liability by a direction
ECH21010
explains that penalties are not appropriate if an employer or
contractor is relieved of the liability by virtue of a direction
under Regulation 72(5) Condition A (
ECH22100) or Regulation 9(5) Condition A
(
ECH14290) respectively.
You must consider directions under both
Regulation 72(5) and
Regulation 9(5) prior to the issue of formal
determinations under Regulation 80 or Regulation 13 respectively.
If a direction is given the tax/CIS deductions included in it must
not be included in the formal determination.
Once the determinations are issued the legislation does not
provide for Regulation72(5) or Regulation 9(5) directions to be made.
Penalties
should be considered if an employer or contractor
is relieved of the liability by virtue of
- Regulation 72(5) Condition B ( ECH22101), or
- Regulation 72F ( ECH22145 onwards)
- Regulation 81(4) Condition A or Condition B ( ECH22102), or
- Regulation 9(5) Condition B ( ECH14290)
You should make a decision on the actions and behaviours of the
employer/contractor in relation to directions given under
Regulation 72F as the imposition of a penalty will depend on the
circumstances of the case.
However if a
Regulation 80 determination is made and
- the employer does not pay the amount determined, and
- you are of the opinion that the employee knew of the wilful (deliberate) failure of the employer to deduct tax
then you can recover the tax from the employee by virtue of
Regulation 81(4). This is purely a collection issue and does not
detract from the original employer failures.
If the employer has been relieved of paying the liability
but you consider they were negligent (or worse) in the submission
of the relevant employer or contractor returns you should still
consider a penalty for submission of the relevant incorrect returns
based on the amount of liability on which the employer or
contractor was relieved (
ECH21040 &
ECH21255).
You should also consider a penalty if the
employer/contractor has failed to make any returns (
ECH21020).
The practicality and viability of the imposition of a
penalty should be a considered where a direction is made because
the employer is unable to pay the PAYE liability (for example
because of insolvency).
