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Employer failed to take reasonable care to deduct PAYE despite engaging payroll agent

04 September 2014 #Employment


A tribunal has held than an employee was not liable for amounts that his employer under-deducted under PAYE because his employer did not take reasonable care to comply with the PAYE rules.

It decided that an employee was not liable for his employer`s PAYE under-deduction because, in simply abandoning payroll matters to its payroll agent, his employer did not take reasonable care to comply with the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682) (PAYE Regulations). The case provides guidance to employers as to what taking reasonable care entails and that HMRC must make appropriate enquiries before being able to consider absolving an employer of responsibility for its PAYE under-deduction.

If an employer so requests, HMRC may direct that under-deducted PAYE amounts be recovered from the employee. HMRC can make this direction if it is satisfied that the employer took reasonable care and the failure to deduct was an error made in good faith.

In this case, the employee`s new employer failed to make sufficient deductions from its payments to him because his P45 did not detail his income from his previous employment. The employee did, however, provide his employer with payslips from his previous employment. The tribunal allowed the employee`s appeal against the direction. The employer could not abandon payroll matters to its agent with neither enquiry nor liaison. 

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at employmentunit@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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