PAYE140035 - The PAYE discretion at s684(7A)(b) ITEPA 2003 and contractor loans avoidance schemes: contents: recording your decision

In all cases, having established the facts it will be for the officer to take a view as to whether it is appropriate to consider using the PAYE discretion to determine that the End Client or UK Agency does not have to comply with the PAYE Regulations. This view must be based on the particular circumstances of the case. 

The officer must produce a written summary of the scheme and the individual circumstances of the scheme use and set out their view on the appropriateness of using the PAYE discretion based on the evidence available.  

Where the officer is below G7 this summary should be submitted to a Counter Avoidance officer of at least G7 for consideration.  That officer will consider the submission alongside this guidance and decide whether to approve or reject use of the PAYE discretion or that further evidence/enquiry is required. This decision must be recorded in writing and uploaded to the appropriate Caseflow record. 

An HMRC officer of G7 or higher grade making the decision on the use of the PAYE discretion does not need additional approval for their decision but must still complete the written summary required above. 

Following a decision to exercise the PAYE discretion and the issue of a decision letter (see PAYE140050) the officer should also add the following note to the individuals Self-Assessment notes

Letter issued in relation to HMRC’s exercise of discretion under S684(7A)(b) ITEPA 2003, as pertaining to the income received via the [enter scheme name] avoidance scheme for the tax year(s) [enter tax years as shown on the Letter to taxpayer] [Copy issued to] [enter name of agent]

This will act as an additional record of your decision and allow colleagues in the Debt Management directorate to identify cases where the PAYE discretion has been exercised.