PAYE95011 - Reconcile individual: HMRC delay: ESC A19: employer error

When reviewing an individuals’ tax record, you should ensure that any underpayment of tax has not occurred because of an employer under-deduction.

Employer under-deductions commonly occur for the following reasons

• Using an incorrect tax code
• Failure to follow the P45 / P46 procedure
• Incorrect deduction due to incorrect use of tax tables
• Incorrectly considering an individuals’ tax status
• Payment of gross pay without operating a code

All the above are due to employer error. On no account should a calculation of the underpayment be sent to the taxpayer in the first instance for any circumstance of a known employer error. This is because any under-deduction of PAYE tax remains the liability of the employer unless relief is given by a PAYE Regulation 72(5) Condition A Direction.

The action guide at PAYE92066 should be followed in all cases of under-deduction.

PAYE Errors Unit (PEU) has sole responsibility for transferring any employer liability onto the employee by issue of a Direction. It is only at this point that the employee could make a claim under ESC A19.

In the event that PEU receive a claim for the concession to apply, they should refer the case papers to the taxpayers owning office, so that the concession can be considered by the Authorising Officer.

If the concession is not applied, then the taxpayers owning office should liaise with PEU, as the taxpayer may choose to exercise their right of appeal against the Direction notice. Please note however, that the appeal should only be in respect of the decision made by PEU that the employer has taken reasonable care to operate PAYE.

PEU will instruct the taxpayers owning office once the appeal is settled.

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)