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(1) This Part provides for the assessment, collection and recovery of income tax in respect of PAYE income.
(2) The provisions of this Part are contained in—
this Chapter (which gives the meaning of “PAYE income”),
Chapter 2 (PAYE: general),
Chapter 3 (PAYE: special types of payer or payee),
Chapter 4 (PAYE: special types of income),
Chapter 5 (PAYE settlement agreements), and
Chapter 6 (miscellaneous and supplemental).
(3) Provision for PAYE regulations is made by Chapters 2 to 6.
(1) For the purposes of this Act and any other enactment (whenever passed) “PAYE income” for a tax year consists of—
(a) any PAYE employment income for the year,
(b) any PAYE pension income for the year, and
(c) any PAYE social security income for the year.
(2) “PAYE employment income” for a tax year means income which consists of—
(a) any taxable earnings from an employment in the year (determined in accordance with section 10(2)), and
(b) any taxable specific income from an employment for the year (determined in accordance with section 10(3)).
(3) “PAYE pension income” for a tax year means, subject to subsection (4), taxable pension income for the year determined in accordance with any of the following provisions—
section 571 (United Kingdom pensions),
section 578 (United Kingdom social security pensions),
section 581 (approved retirement benefits schemes: pensions and annuities),
section 584 (approved retirement benefits schemes: unauthorised payments),
section 591 (former approved superannuation funds: annuities),
section 596 (approved personal pension schemes: annuities),
section 599 (approved personal pension schemes: income withdrawals),
section 602 (approved personal pension schemes: unauthorised payments),
section 616 (certain overseas government pensions paid in the United Kingdom),
section 621 (the House of Commons Members' Fund),
section 634 (voluntary annual payments).
(4) “PAYE pension income” does not include any taxable pension income determined in accordance with section 584 that would not be such income if section 587 (marine pilots' benefit fund) were omitted.
(5) “PAYE social security income” for a tax year means taxable social security income for the year determined in accordance with section 658(4) or (5) (taxable United Kingdom social security benefits).
(1) The Board of Inland Revenue must make regulations (“PAYE regulations”) with respect to the assessment, charge, collection and recovery of income tax in respect of all PAYE income.
(2) PAYE regulations may, in particular, include any such provision as is set out in the following list.
List of Provisions
1. Provision—
for requiring persons making payments of, or on account of, PAYE income to make, at the time of the payment, deductions or repayments of income tax calculated by reference to tax tables prepared by the Board of Inland Revenue, and
for making persons who are required to make any such deductions or repayments accountable to or, as the case may be, entitled to repayment from the Board.
2. Provision for the collection and recovery, whether by deduction from any PAYE income paid in any later year or otherwise, of income tax in respect of any such income which has not been deducted or otherwise recovered during the year.
3. Provision for the production to, and inspection by, persons authorised by the Board of wages sheets and other documents and records for the purposes of satisfying themselves that income tax has been and is being deducted, repaid and accounted for in accordance with the regulations.
4. Provision for requiring an employer or former employer to provide any information, within a prescribed time, about payments or other benefits provided or to be provided, including those provided or to be provided in connection with—
the termination of a person’s employment, or
a change in the duties of or general earnings from a person’s employment.
5. Provision for the way in which any matters provided for by the regulations are to be proved.
6. Provision—
for requiring the payment of interest on sums due to the Board which are not paid by the due date,
for determining the date (being not less than 14 days after the end of the tax year in respect of which the sums are due) from which such interest is to be calculated, and
for enabling the repayment or remission of such interest.
7. Provision for requiring the payment of interest on sums due from the Board and for determining the date from which such interest is to be calculated.
8. Provision for the assessment and charge of income tax in respect of PAYE income.
9. Provision for appeals with respect to matters arising under the regulations which would otherwise not be the subject of an appeal.
10. Different provision for different cases or classes of case.
11. Any incidental, consequential, supplementary and transitional provision which appears to the Board to be expedient.
(3) The deductions of income tax required to be made by PAYE regulations under item 1 in the above list may be required to be made at the basic rate or other rates in such cases or classes of case as may be provided by the regulations.
(4) Interest required to be paid by PAYE regulations under item 6 or 7 in the above list must be paid without any deduction of income tax and may not be taken into account in computing any income, profits or losses for any tax purposes.
(5) PAYE regulations must not affect any right of appeal to the General or Special Commissioners which a person would have apart from the regulations.
(6) It does not matter for the purposes of PAYE regulations that income is wholly or partly income for a tax year other than that in which the payment is made.
(7) PAYE regulations have effect despite anything in the Income Tax Acts.
(8) In this Act and any other enactment (whenever passed) “PAYE regulations” means regulations under this section.
(1) The Board of Inland Revenue must construct tax tables with a view to securing that so far as possible—
(a) the total income tax payable in respect of PAYE income for any tax year is deducted from PAYE income paid during that year, and
(b) the income tax deductible or repayable on the occasion of any payment of, or on account of, PAYE income is such that the following proportions are the same—
(i) the proportion which the total net income tax deducted since the beginning of the tax year bears to the total income tax payable for the year, and
(ii) the proportion which the part of the tax year which ends with the date of the payment bears to the whole year.
(2) References in subsection (1) to the total income tax payable for the year are to be read as references to the total income tax estimated to be payable for the year in respect of the income in question—
(a) subject to a provisional deduction for allowances and reliefs, and
(b) subject, if necessary, to an adjustment for amounts overpaid or remaining unpaid on account of income tax in respect of PAYE income for any previous year.
(3) For the purpose of estimating the total income tax payable as mentioned in subsection (1)(a), it may be assumed, in relation to any payment of, or on account of, PAYE income, that the following proportions will be the same—
(a) the proportion which the income paid in the part of the tax year which ends with the making of the payment bears to the income for the whole year, and
(b) the proportion which that part of the tax year bears to the whole year.
(1) For the purposes of PAYE regulations, a payment of, or on account of, PAYE income of a person is treated as made at the earliest of the following times—
Rule 1
The time when the payment is made.
Rule 2
The time when the person becomes entitled to the payment.
Rule 3
If the person is a director of a company and the income is income from employment with the company (whether or not as director), whichever is the earliest of—
the time when sums on account of the income are credited in the company’s accounts or records (whether or not there is any restriction on the right to draw the sums);
if the amount of the income for a period is determined before the period ends, the time when the period ends;
if the amount of the income for a period is not determined until after the period has ended, the time when the amount is determined.
(2) Rule 3 applies if the person is a director of the company at any time in the tax year in which the time mentioned falls.
(3) In this section “director” means—
(a) in relation to a company whose affairs are managed by a board of directors or similar body, a member of that board or body,
(b) in relation to a company whose affairs are managed by a single director or other person, that director or person, and
(c) in relation to a company whose affairs are managed by the members themselves, a member of the company,
and includes any person in accordance with whose directions or instructions the company’s directors (as defined above) are accustomed to act.
(4) For the purposes of subsection (3) a person is not regarded as a person in accordance with whose directions or instructions the company’s directors are accustomed to act merely because the directors act on advice given by that person in a professional capacity.
(1) If any payment of, or on account of, PAYE income of an employee is made by an intermediary of the employer, the employer is to be treated, for the purposes of PAYE regulations, as making a payment of the income of an amount equal to the amount given by subsection (3).
(2) Subsection (1) does not apply if the intermediary (whether or not a person to whom PAYE regulations apply) deducts income tax from the payment the intermediary makes, and accounts for it, in accordance with PAYE regulations.
(3) The amount referred to is—
(a) if the amount of the payment made by the intermediary is an amount to which the recipient is entitled after deduction of income tax, the aggregate of the amount of the payment and the amount of any income tax due, and
(b) in any other case, the amount of the payment.
(4) For the purposes of this section a payment of, or on account of, PAYE income of an employee is made by an intermediary of the employer if it is made—
(a) by a person acting on behalf of the employer and at the expense of the employer or a person connected with the employer, or
(b) by trustees holding property for any persons who include or class of persons which includes the employee.
(1) If the remuneration receivable by an individual under or in consequence of any contract falls to be treated under section 44 (agency workers) as earnings from an employment, the relevant provisions have effect as if the individual held the employment with or under the agency.
(2) If—
(a) the remuneration receivable by an individual under or in consequence of any contract falls to be so treated under section 44, and
(b) a payment of, or on account of, PAYE income of the individual is made by a person acting on behalf of the client, and at the expense of the client or a person connected with the client,
section 687 and, in relation to any payment treated as made by the client under section 687, section 710 have effect in relation to the payment as if the client and not the agency were the employer for the purposes of the relevant provisions.
(3) In subsections (1) and (2)—
“the agency” and “the client” have the same meanings as in section 44;
“the relevant provisions” means this Chapter except section 691, Chapter 4 of this Part and section 710.
(1) This section applies if—
(a) an employee during any period works for a person (“the relevant person”) who is not the employer of the employee,
(b) any payment of, or on account of, PAYE income of the employee in respect of that period is made by a person who is the employer or an intermediary of the employer or of the relevant person,
(c) PAYE regulations do not apply to the person making the payment or, if that person makes the payment as an intermediary of the employer or of the relevant person, the employer, and
(d) income tax is not deducted, or not accounted for, in accordance with the regulations by the person making the payment or, if that person makes the payment as an intermediary of the employer or of the relevant person, the employer.
(2) The relevant person is to be treated, for the purposes of PAYE regulations, as making a payment of PAYE income of the employee of an amount equal to the amount given by subsection (3).
(3) The amount referred to is—
(a) if the amount of the payment actually made is an amount to which the recipient is entitled after deduction of income tax, the aggregate of the amount of the payment and the amount of any income tax due, and
(b) in any other case, the amount of the payment.
(4) If, by virtue of any of sections 693 to 700, an employer would be treated for the purposes of PAYE regulations (if they applied to the employer) as making a payment of any amount to an employee, this section has effect as if—
(a) the employer were also to be treated for the purposes of this section as making an actual payment of that amount, and
(b) paragraph (a) of subsection (3) were omitted.
(5) For the purposes of this section a payment of, or on account of, PAYE income of an employee is made by an intermediary of the employer or of the relevant person if it is made—
(a) by a person acting on behalf of the employer or the relevant person and at the expense of the employer or the relevant person or a person connected with the employer or the relevant person, or
(b) by trustees holding property for any persons who include or class of persons which includes the employee.
(6) In this section and sections 690 and 691 “work”, in relation to an employee, means the performance of any duties of the employment of the employee and any reference to the employee’s working is to be read accordingly.
(1) This section applies in relation to an employee in a tax year only if the employee—
(a) is not resident or, if resident, not ordinarily resident in the United Kingdom, and
(b) works or will work in the United Kingdom and also works or is likely to work outside the United Kingdom.
(2) If in relation to an employee to whom this section applies and any tax year it appears to the Inland Revenue that—
(a) some of the income paid to the employee by the employer is PAYE income, but
(b) some of that income may not be PAYE income,
the Inland Revenue may, on an application made by the appropriate person, give a direction for determining a proportion of any payment made in that year of, or on account of, income of the employee which is to be treated as PAYE income.
(3) In this section—
(a) “the appropriate person” means the person designated by the employer for the purposes of this section and, if no person is so designated, the employer, and
(b) any reference to a payment made by the employer includes a reference to a payment made by a person acting on behalf of the employer and at the expense of the employer or a person connected with the employer.
(4) An application under subsection (2) must provide such information as is available and is relevant to the application.
(5) A direction under subsection (2)—
(a) must specify the employee to whom and the tax year to which it relates,
(b) must be given by notice to the appropriate person, and
(c) may be withdrawn by notice to the appropriate person from a date specified in the notice.
(6) The date so specified may not be earlier than 30 days from the date on which the notice of withdrawal is given.
(7) If—
(a) a direction under subsection (2) has effect in relation to an employee to whom this section applies, and
(b) a payment of, or on account of, the income of the employee is made by the employer in the tax year to which the direction relates,
the proportion of the payment determined in accordance with the direction is to be treated for the purposes of PAYE regulations as a payment of PAYE income of the employee.
(8) If in any tax year—
(a) no direction under subsection (2) has effect in relation to an employee to whom this section applies, and
(b) any payment of, or on account of, the income of the employee is made by the employer,
the entire payment is to be treated for the purposes of PAYE regulations as a payment of PAYE income of the employee.
(9) Subsections (7) and (8) are without prejudice to—
(a) any assessment in respect of the income of the employee in question, and
(b) any right to repayment of income tax overpaid and any obligation to pay income tax underpaid.
(10) In a case where section 689 applies—
(a) the references to the employer in subsection (3)(a) are to be read as references to the relevant person, and
(b) any reference to a payment made by the employer is to be read as a reference to a payment treated, for the purposes of PAYE regulations, as made by the relevant person.
In this subsection “the relevant person” has the same meaning as in section 689.
(1) This section applies if it appears to the Board of Inland Revenue that—
(a) a person (“the relevant person”) has entered into or is likely to enter into an agreement that employees of another person (“the contractor”) are in any period to work for, but not as employees of, the relevant person,
(b) payments of, or on account of, PAYE income of the employees in respect of work done in that period are likely to be made by or on behalf of the contractor, and
(c) PAYE regulations would apply on the making of such payments but it is likely that income tax will not be deducted, or will not be accounted for, in accordance with the regulations.
(2) The Board may give a direction that, if—
(a) any of the employees of the contractor work in any period for, but not as employees of, the relevant person, and
(b) any payment is made by the relevant person in respect of work done by the employees in that period,
income tax is to be deducted in accordance with the provisions of this section by the relevant person on making the payment.
(3) A direction under subsection (2)—
(a) must specify the relevant person and the contractor to whom it relates;
(b) must be given by notice to the relevant person; and
(c) may at any time be withdrawn by notice to the relevant person.
(4) The Board must take such steps as are reasonably practicable to ensure that a contractor is supplied with a copy of any notice under subsection (3) which relates to him.
(5) If—
(a) a direction under subsection (2) has effect, and
(b) any employees of the contractor specified in the direction work for, but not as employees of, the relevant person so specified,
income tax is, subject to and in accordance with PAYE regulations, to be deducted by the relevant person on making any payment in respect of that work as if so much of the payment as is attributable to work done by each employee were a payment of PAYE income of that employee.
(1) PAYE regulations may make provision with respect to organised arrangements for tips to be shared among employees by a person (“P”) who is not the principal employer.
(2) PAYE regulations may include provisions which, for the purposes of PAYE regulations—
(a) treat every payment made by P to an employee by way of the employee’s share of any tips (including the retention by P of P’s own share if P is an employee) as a payment of PAYE income by P, and
(b) treat P as the employer in relation to every such payment.
(3) PAYE regulations may also include provisions which—
(a) apply if P has failed to comply with any of the requirements of PAYE regulations, and
(b) treat the principal employer, for the purposes of PAYE regulations, as making payments to the employees of any tips paid over to P by the principal employer.
(4) In this section—
“the principal employer” means the person under whose general control and management the employees work;
“tips” means gratuities and service charges.
(1) If a cash voucher to which Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) applies is received by an employee at any time, the employer is to be treated, for the purposes of PAYE regulations, as making at that time a payment of PAYE income of the employee of an amount equal to the amount ascertained under section 81(2) (benefit of cash voucher treated as earnings).
(2) This section does not apply to the provision of a cash voucher if—
(a) the voucher is used to meet expenses, and
(b) if the amount for which the voucher is capable of being exchanged had been paid directly to the employee by his or her employer, the amount would not have been PAYE income except by virtue of section 70 (sums in respect of expenses).
(3) This section does not apply to the provision of a cash voucher if it is exchanged for an amount which—
(a) is used to meet expenses, and
(b) if it had been paid directly to the employee by the employer, would not have been PAYE income except by virtue of section 70.
(4) PAYE regulations may exclude from the scope of this section the provision of cash vouchers in circumstances specified in the regulations.
(5) A cash voucher provided for an employee and appropriated to the employee—
(a) by attaching it to a card held for the employee, or
(b) in any other way,
is to be treated for the purposes of this section as having been received by the employee at the time when it is appropriated.
(1) If a non-cash voucher to which this section applies is received by an employee, the employer is to be treated, for the purposes of PAYE regulations, as making a payment of PAYE income of the employee of an amount equal to the amount ascertained under section 87(2) (benefit of non-cash voucher treated as earnings).
(2) This section applies to a non-cash voucher to which Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) applies if—
(a) either of the conditions set out below is met with respect to the voucher, and
(b) the voucher is not of a description for the time being excluded from the scope of this section by PAYE regulations.
(3) The first condition is met with respect to a non-cash voucher if it is capable of being exchanged for anything which, if provided to the employee at the time when the voucher is received, would fall to be regarded as a readily convertible asset.
(4) The second condition is met with respect to a non-cash voucher if (but for section 701(2)(b)) it would fall itself to be regarded as a readily convertible asset.
(5) A payment under subsection (1) is made—
(a) in the case of a non-cash voucher other than a cheque voucher, at the time when the cost of provision is incurred or, if later, the time when the voucher is received by the employee;
(b) in the case of a cheque voucher, at the time when the voucher is handed over in exchange for money, goods or services.
(6) For the purposes of subsection (5)—
“cheque voucher” has the same meaning as in Chapter 4 of Part 3;
“cost of provision”, in relation to a voucher provided by an employer, has the meaning given by section 87;
and a cheque voucher that is posted is to be treated as handed over at the time of posting.
(7) A non-cash voucher provided for an employee and appropriated to the employee—
(a) by attaching it to a card held for the employee, or
(b) in any other way,
is to be treated for the purposes of this section as having been received by the employee at the time when it is appropriated.
(1) On each occasion on which an employee uses a credit-token provided to the employee because of the employee’s employment to obtain—
(a) money, or
(b) anything which, if provided to the employee at the time when the credit-token is used, would fall to be regarded as a readily convertible asset,
the employer is to be treated, for the purposes of PAYE regulations, as making a payment of PAYE income of the employee of an amount equal to the amount ascertained under section 94(2) (benefit of credit-token treated as earnings).
(2) The use of a credit-token by an employee to obtain money is excluded from the scope of this section if the money—
(a) is used to meet expenses, and
(b) if it had been paid directly to the employee by the employer, would not have been PAYE income except by virtue of section 70 (sums in respect of expenses).
(3) PAYE regulations may make provision for excluding from the scope of this section any other description of use of a credit-token.
(1) If any PAYE income of an employee is provided in the form of a readily convertible asset, the employer is to be treated, for the purposes of PAYE regulations, as making a payment of that income of an amount equal to the amount given by subsection (2).
(2) The amount referred to is the amount which, on the basis of the best estimate that can reasonably be made, is the amount of income likely to be PAYE income in respect of the provision of the asset.
(1) This section applies if—
(a) any PAYE income of an employee is provided in the form of anything enhancing the value of an asset in which the employee or a member of the employee’s family or household already has an interest, and
(b) that asset, with its value enhanced, would be treated as a readily convertible asset if PAYE income were provided to the employee in the form of the asset at the time of the enhancement.
(2) Section 696 has effect as if—
(a) the employee had been provided, at the time of the enhancement, with PAYE income in the form of the asset (with its value enhanced), instead of with what enhanced its value, and
(b) the reference in subsection (2) to the provision of the asset were a reference to the enhancement of its value.
(3) Any reference in this section to enhancing the value of an asset is a reference to—
(a) the provision of any services by which the asset or any right or interest in it is improved or otherwise made more valuable,
(b) the provision of any property the addition of which to the asset improves it or otherwise increases its value, or
(c) the provision of any other enhancement by the application of money or property to the improvement of the asset or to securing an increase in its value or the value of any right or interest in it.
(4) There is excluded from the scope of what constitutes enhancing the value of an asset for the purposes of this section any enhancement of value arising on the acquisition by the employee (whether or not as a result of the exercise of a right to acquire shares) of—
(a) any shares acquired by the employee under a scheme approved under Schedule 3 (approved SAYE option schemes) or 4 (approved CSOP schemes), or Schedule 9 to ICTA (approved profit sharing schemes),
(b) any right over or interest in shares obtained or acquired by the employee under such a scheme, or
(c) any shares acquired by the employee as a result of the exercise of a right over shares obtained before 27th November 1996,
if the shares in question form part of the share capital of a company falling within section 701(3).
(5) PAYE regulations may make provision excluding such other matters as may be described in the regulations from the scope of what constitutes enhancing the value of an asset for the purposes of this section.
Income Tax (Earnings and Pensions) Act 2003