PAYE92066 - Reconcile individual: posting P14 to individual record: under-deductions - action required in service teams (Action Guide)

Review case and contact employer

Steps 1 - 3

Action to take on response to BF - employer pays full amount

Steps 4 - 5

Action to take on response to BF - employer declines to pay

Steps 6 - 8

Action to take where there is no response from the employer

Step 9

PAYE Credit

Step 10 - 11

1.

Use Office Clerical Assistant to issue OCA39 PAYE - Employment Under Deductions. This asks for payment and for an explanation of why the underpayment has arisen. Where more than one employee is involved you should include the following details

• Employee’s name and NINO

• Gross pay this employment

• P14 tax code and tax code last issued according to the PAYE record

• Amount under-deducted by the employer

2.

Does the P14 submitted indicate that the underpayment has arisen because an incorrect code was operated?

• If yes amend the code immediately so the correct deductions can be made for the current tax year. It is likely that the code will have to be issued on a week 1 or month 1 basis. Then go to step 3

• If no go to step 3

3.

Create a work item (PAYE110080) and BF case for 4 weeks (PAYE110060)

• If the employer responds with a cheque for the full amount of the under-deduction go to step 4

• If the employer declines to pay or sends an explanation go to step 6

• If the employer does not respond go to step 6

4.

When the employer responds with a cheque for the full amount of the under-deduction

• Deal with the cheque according to the existing guidance in your office

• Prepare a pro-forma amended P35 and a P14 for each employee for the tax year of the under-deduction(s)

• Update Contact History for all employees concerned using note ‘Under-deduction, full amount paid by employer’ available from SEES notes paster

• BF the case for 14 days and check that the proforma has cleared the underpayment and reconciled the customer record(s)

• If the under-deduction was not inadvertent, refer the employer’s explanation to the RISK team as penalties for an incorrect return may be appropriate

5.

For PAYE customers, review the liability in each case

• Where the under-deduction was the sole reason for the case being open, the year can be reconciled

• Where there are other reasons for the case being open, the year should be reviewed in the normal way by following the guidance at PAYE93000 onwards

6.

Where the employer declines to pay an under-deduction they

• Should provide you with a full explanation as to how the error occurred

• May request that a PAYE direction is made

7.

A PAYE direction relieves the employer of the liability for PAYE tax and can only be made by PAYE Errors Unit (PEU), Shipley. See (PAYE92050). If the explanation shows that the employer did make an error then you should refer the case to PEU

• Using form P400, including full details of the under-deduction

• Attach a memo explaining the facts and include all correspondence

• Update Contact History with SEES note ‘Under-deduction PAYE Direction request’ and b/f manual work item to await PEU instructions

8.

If the employer’s explanation demonstrates that no error was made then

• There is no employer under-deduction and the tax is an underpayment legally due from the customer

• You should continue collection of the underpayment from the customer

9.

Where there is no response from the employer within 6 weeks

• Refer the case using form P400 to the Debt Management office (DMO) responsible for the employer record, for them to pursue the outstanding PAYE liability

• The DMO responsible can be identified by the office numeral attached to the employer record

• BF your work item for 2 months

• Update Contact History using SEES note ‘Under-deduction, no response’

• Contact DMO if you do not receive a response and BF a further month

The DMO should commence recovery action by issue of a Certificate of Debt if the employer fails to respond with payment

Under the PAYE Regulations an employee is due a PAYE credit under Regulation 185 or 188 that should be restricted as necessary to prevent any repayment arising

10.

A PAYE credit should be given for the following reasons

• The employer pays the tax

• PEU issue a Refusal Notice to the employer which says they remain liable

• After repeated attempts by DMO the employer has not responded

11.

Any PEU PAYE Direction issued will mean that the under-deduction is payable by the employee and therefore no credit should be given. Please note however that

• PAYE Directions carry a right of appeal which may be overturned at Tribunal Review

• Employers also have the right of appeal which, if overturned will mean that any credit given should be removed from the taxpayer record