The Income Tax (Pay As You Earn) (Amendment) (No. 2) Regulations, SI 2024/355, enable HMRC to set off tax already paid by a worker or intermediary against the PAYE liability of the deemed employer where the off-payroll rules had not been applied correctly.
The regulations deal with the situation where the deemed employer has failed to make deductions under PAYE from payments made to an off-payroll worker. Where the individual or their intermediary has already paid tax on that income, HMRC will be able to set that tax off against the outstanding PAYE liability. The underlying aim of the change is to avoid overcollection of tax as a result of the application of the off-payroll working rules.
This scenario will typically apply where the tax was paid on the understanding that there was no deemed employment relationship, but where the engagement has subsequently been recategorised under the off-payroll working rules, resulting in the payments being treated as earnings from employment.
Documentation published alongside HMRC’s consultation on this change earlier in 2024 provides useful background detail.
The Income Tax (Pay As You Earn) (Amendment) (No. 2) Regulations, SI 2024/355, enable HMRC to set off tax already paid by a worker or intermediary against the PAYE liability of the deemed employer where the off-payroll rules had not been applied correctly.
The regulations deal with the situation where the deemed employer has failed to make deductions under PAYE from payments made to an off-payroll worker. Where the individual or their intermediary has already paid tax on that income, HMRC will be able to set that tax off against the outstanding PAYE liability. The underlying aim of the change is to avoid overcollection of tax as a result of the application of the off-payroll working rules.
This scenario will typically apply where the tax was paid on the understanding that there was no deemed employment relationship, but where the engagement has subsequently been recategorised under the off-payroll working rules, resulting in the payments being treated as earnings from employment.
Documentation published alongside HMRC’s consultation on this change earlier in 2024 provides useful background detail.
