PAYE140060 - The PAYE discretion at s684(7A)(b) ITEPA 2003 and contractor loans avoidance schemes: contents: how use of the PAYE discretion will work where there is a closed enquiry or an assessment has been issued and the decision is under appeal

Where a case is already in litigation or litigation is considered to be likely, the officer should give the individual written notification at the earliest possible stage after a decision has been made to exercise the PAYE discretion. If the case is already in litigation, SOLS should be consulted before this notification is given. 

An officer in Counter Avoidance will review cases to determine whether the PAYE discretion should be exercised at an appropriate point before the individual’s appeal is heard by the Tribunal or a view of the matter letter is to be issued to the individual.  Sometimes earlier consideration of the PAYE discretion might be appropriate, for example if the individual seeks to agree a contract settlement on the basis that the income they received through the scheme is PAYE income, so they are entitled to have an amount treated as deducted at source in respect of that taxable income.  HMRC would then need to confirm to the individual whether they will be entitled to have an amount treated as deducted at source. 

In this situation the officer should then follow the same consideration process, set out in this guidance including the review by a G7 or higher grade officer.  The colleague should reject or approve use of the PAYE discretion based on this guidance and notify their decision to the officer.  The officer should then issue a written confirmation to the individual of whether they will be entitled to have an amount treated as deducted at source in respect of that taxable income.