PAYE73030 - PAYE operation: simplified deduction schemes: K code appropriate
K codes cannot be operated within a simplified deduction
scheme. Your manager should examine the case and decide whether to
withdraw the simplified deduction scheme arrangements and replace
them by the normal PAYE system.
Your manager will want to take account of all the
circumstances, including any anticipated problems in securing the
operation of full PAYE by the employer. It may be that experience
of the employer indicates they are unlikely to comply with the
requirement to operate full PAYE. In this case it may be
inappropriate to make such a proposal, as withdrawing the
simplified deduction scheme arrangements would lead to unnecessary
difficulties.
Simplified deduction scheme arrangements withdrawn
If your manager decides that the simplified deduction scheme
arrangements are to be withdrawn
- Write to the employer
- Explain that a K code is required for one of his or her employees and for that reason simplified PAYE is no longer appropriate
- Propose that the employer operates full PAYE from the following 6 April, offering a broad explanation of what that entails and, wherever practical, offer the assistance of the Business Support Team (BST), to explain how to operate PAYE
- Ask for the employer's agreement to that proposal within (say) 30 days
If the employer agrees
- Advise the Employer section to change the scheme type from ‘DOME’ to P’ on the following 6 April
- The Employer section will follow ‘Change Scheme Type - DOME to P’ (Action Guide) at PAYE27027
If the employer disagrees and his or her objection is accepted
- Write to the employee involved to explain that
- A K code cannot be operated by his or her employer and consequently he or she will remain on code 0T while present circumstances prevail
- It will be necessary for him or her (the taxpayer) to self assess and to pay any balancing payment (underpayment) direct to Banking Operations
- Pass the papers to the Self Assessment team, to bring the taxpayer into self assessment and to link the SA and COP taxpayer records
