What is a determination?

Produced by Tolley in association with Philip Rutherford
What is a determination?

The following Employment Tax guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • What is a determination?
  • When is a determination used?
  • Quantum of the determination
  • Time limits for HMRC to make a determination
  • Effect of a determination
  • Interaction with returns
  • Appeals
  • Interaction with self-assessment
  • P11D implications
  • Regulation 110 Determination
  • More...

Determinations can be issued against an employer for a failure to operate PAYE correctly, and the under-payment of PAYE and NIC by the employer to HMRC. Unlike other HMRC determinations, these determinations are not issued against the taxpayer, ie the employee, but against the employer who has failed to deduct the appropriate amount of tax and NIC from the employee’s earnings.

A determination is HMRC’s formal calculation of the amount of tax that is due. These are typically only used as a last resort by HMRC when informal requests for payment of the underpaid tax have been ignored. They should be treated as serious compliance failures by the employer.

HMRC’s guidance at PAYE 54000 onwards provides very practical guidance to officers and can be very useful to an adviser when considering the steps that HMRC has taken in raising a determination.

When is a determination used?

There are two different forms of PAYE determination, one made under reg 80 for PAYE failures and one under reg 110 for PAYE Settlement Agreement failures. In addition Class 1 NIC can be determined under a separate piece of legislation (the Social Security Contributions (Transfer of Functions) Act 1999, s 8).

Reg 80 gives HMRC the power to determine the amount of tax that is due by an employer but remains unpaid by the employer. It is the duty of the employer to pay the determination not the employee.

HMRC guidance (PAYE54035) advises officers that a determination is appropriate in the following circumstances:

  1. for the settlement of a dispute about PAYE duties where the employer will not pay the tax

  2. there is a compliance check on a director of the employer company

  3. where HMRC’s debt management team has difficulties in obtaining the information necessary to quantify the amount of tax at stake

Reg 80 only gives HMRC the power to assess tax due on earnings. Typically National Insurance Contributions will also be due on the same amount. The power to determine NIC is

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