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Not fair!

28 March 2007
Issue: 4101 / Categories: Forum & Feedback

When PAYE compliance officers discover that employers have made payments to or for employees without deducting tax, they calculate the tax and National Insurance liabilities on the basis that the payments made are net of tax. So far as I can see this has no statutory basis, but it makes logical sense and meets the general law principle that compensation for losses should put the claimant in the position they would have been.

When PAYE compliance officers discover that employers have made payments to or for employees without deducting tax they calculate the tax and National Insurance liabilities on the basis that the payments made are net of tax. So far as I can see this has no statutory basis but it makes logical sense and meets the general law principle that compensation for losses should put the claimant in the position they would have been.
However applying the same principle to payments to a worker who has been re-categorised from self employed to employee does not seem to give a fair result since tax and National Insurance are applied to the tax and National Insurance already paid by the worker. Surely the correct calculation would be to deduct the tax and National Insurance paid by the worker from the payments made and then recalculate the tax and...

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