ECH22100 - Settlement: Direction under Regulation 72(5) Condition A

Employers are responsible for the correct operation of PAYE and normally will be held responsible for any failures.

An employer who

• fails to deduct PAYE or
• under-deducts PAYE

from an employee is liable for the tax underpaid.

However by making a direction under Regulation 72(5) Condition A, the PAYE Errors Unit (PEU) can relieve the employer of liability. Effectively the liability is transferred to the employee.

To do this the PEU must be satisfied by the employer that

• the employer took reasonable care to comply with the PAYE Regulations and
• the failure to deduct the correct amount of tax was due to an error made in good faith.

More information can be found in the PAYE Manual (PAYE92050).

If an employer makes such a claim the caseworker should

• not resist the claim
• remember that the employer does not have to mention the actual Regulation or specifically claim relief for a direction to be considered
• establish all the relevant facts about how the under-deduction occurred
• advise the employer that the matter will be reported to the PEU for consideration.
• Note: The caseworker should on no account give any opinion on whether a direction will be made.

Action by Caseworker

If an employer asks for, or the caseworker considers a direction under Regulation 72(5) Condition A is appropriate

• a copy of the relevant papers and a summary of the facts should be referred to:

PAYE Errors Unit
3rd Floor
Accounts Office
Victoria Street
Shipley
BD98 8AA

PEU will notify the EC team of the outcome once the full facts are known, considered and a decision is made.

Penalties for incorrect returns

See ECH21010