The Income Tax (Pay As You Earn) Regulations 2003

F1...U.K.

[F2Periodic payments to and recoveries from HMRC: non-Real Time Information employers]U.K.

68.—(1) This regulation applies to determine how much [F3a non-Real Time Information employer] must pay or can recover for a tax period.

(2) If A exceeds B, the employer must pay the excess to the Inland Revenue.

(3) But if B exceeds A, the employer may recover the excess either—

(a)by deducting it from the amount which the employer is liable to pay under paragraph (2) for a later tax period in the tax year, or

(b)from the Board of Inland Revenue.

(4) In this Regulation—

• A is—

  (a)

  the total amount of tax which the employer was liable to deduct from relevant payments made by the employer in the tax period, plus

  (b)

  the total amount of tax for which the employer was liable to account in respect of notional payments made [F4or treated by virtue of a retrospective tax provision as made,] by the employer in that period under regulation 62(5) (notional payments);

• B is the total amount which the employer was liable to repay in the tax period.

(5) Paragraphs (2) and (3) are subject to regulation 71 (modification in case of trade disputes).

(6) Paragraph (2) is also subject to regulation 78(11) (entitlement to set off excess payments).

[F5(7) In the application of paragraph (4) to notional payments arising by reason of the coming into force of the Finance Act 2006, the reference to section 710(7A)(a) of ITEPA 2003 shall be modified as mentioned in section 94(5)(c) of the Finance Act 2006.]

Due date and receipts for payment of taxU.K.

69.—(1) An employer must pay amounts due under regulation [F667G(2) [F7, as adjusted by regulation 67H(2) where appropriate,] or] 68(2)—

(a)within 17 days after the end of the tax period, where payment is made by an approved method of electronic communications, or

(b)within 14 days after the end of the tax period, in any other case.

[F8(1A) In paragraph (1), the reference to amounts due under regulation 67G(2) includes any amount the employer was liable to deduct from employees during the tax period whether or not that amount was included in any return under regulation 67B (real time returns of information about relevant payments) or 67D (exceptions to regulation 67B).]

(2) The Inland Revenue must give a receipt to the employer for the total amount paid under regulation [F667G(2) [F7, as adjusted by regulation 67H(2) where appropriate,] or] 68(2) if asked.

(3) But no separate receipt for tax only need be given if a receipt is given for the total amount of tax and any earnings-related contributions (as defined by regulation 1(2) of [F9the SSC Regulations])(1) paid at the same time.

[F10(4) In paragraph (1) “the tax period”, in relation to an amount of retrospective employment income, means the tax period immediately following the relevant time.]

[F11Circumstances in which payment of a lesser amount is to be treated as payment in full for the purposes of paragraph 6(2) of Schedule 56 to the Finance Act 2009U.K.

69A.—(1) A payment that is less than the full amount due under regulation 67G(2) (payments to and recoveries from HMRC for each tax period), as adjusted by regulation 67H (payments due and recoveries from HMRC for each tax period: returns under regulation 67E(6)) where appropriate, will for the purposes of paragraph 6(2) of Schedule 56 to the Finance Act 2009 (amount of penalty: PAYE and CIS) be treated as payment of the full amount if the difference between the full amount and the amount paid is no more than £100 (“the tolerance”), but this is subject to paragraphs (2) and (3).

(2) Paragraph (1) does not apply where—

(a)the payment relates to a return which is correcting information given in a return filed in respect of a relevant payment made in an earlier tax month, and

(b)the return is delivered after 19th April following the end of the tax year in question.

(3) If the total sum paid by the employer to HMRC for the tax period includes not only the amount due under regulation 67G(2), as adjusted by regulation 67H where appropriate, but also one or more of—

(a)any earnings-related contributions (as defined by regulation 1(2) of the SSC Regulations 2001),

(b)any payment under regulation 7(1) of the Income Tax (Construction Industry Scheme) Regulations 2005, or

(c)any repayment due under the Student Loans Regulations,

the tolerance is applied to the total sum paid to HMRC for the tax period to which the payments relate.]

Quarterly tax periodsU.K.

70.—(1) This regulation applies, so that the tax period is a tax quarter, if an employer—

(a)has reasonable grounds for believing that the average monthly amount will be less than £1,500, and

(b)chooses to pay tax quarterly.

[F12(1A) But this regulation does not apply, so that the tax period remains a month, in respect of amounts of retrospective employment income.]

(2) “The average monthly amount” is the average, for tax months falling within the current tax year, of the amounts found by the formula—

(3) In paragraph (2)—

• P is the amount which would be payable to the Inland Revenue under regulation [F1467G [F15, as adjusted by regulation 67H(2) where appropriate,] or] 68 [F16but disregarding any amount payable in respect of retrospective employment income] ...;

• N is the amount which would be payable to the Inland Revenue under the SSCBA and the SSC Regulations disregarding—

  (a)

  any amount of secondary Class 1 contributions in respect of which liability has been transferred to the employed earner by an election made jointly by the employed earner and the secondary contributor for the purposes of paragraph 3B(1) of Schedule 1 to the SSCBA (transfer of liability to be borne by earner)(2); ...

  (aa)

  [F17any amount payable under retrospective contributions regulations (see paragraph 1(2) of Schedule 4 to the SSC Regulations) in respect of retrospective earnings (within the meaning of those Regulations);]

  (c)

  ...

• L is the amount which would be payable to the Inland Revenue under regulation [F1854(1) or, in Northern Ireland, 49(1)] of the Student Loans Regulations (payment of repayments deducted to the Inland Revenue) disregarding—

  (a)

  the reduction referred to in paragraph (3) of [F18those regulations], ...

  (b)

  ...

• S is the amount which would be payable by the employer to the Inland Revenue under sections 559 and 559A of ICTA(3) (deduction on account of tax etc from payments to certain sub-contractors) and regulation 8 of the Income Tax (Sub-contractors in the Construction Industry) Regulations 1993(4)...;

• ...

• SP is the amount which would be payable by the employer to employees by way of statutory sick pay, statutory maternity pay, [F19statutory paternity pay] [F20, statutory shared parental pay] [F21, statutory adoption pay and statutory parental bereavement pay] under the SSCBA; and

• CD is—

  (a)

  if the employer is a company, the amount which others would deduct from payments to it, in its position as a sub-contractor, under section 559 of ICTA (deduction on account of tax etc from payments to certain sub-contractors);

  (b)

  in any other case, nil.

(4) In this regulation—

“employed earner” has the same meaning as in the SSCBA;

“SSCBA” means the Social Security Contributions and Benefits Act 1992(5) or, in Northern Ireland, the Social Security Contribution and Benefits (Northern Ireland) Act 1992(6);

...

...

...

...

Modification of [F22regulations 67G and 68] in case of trade disputeU.K.

71.—(1) This regulation modifies the amount payable or recoverable by an employer under [F23regulations 67G and 68] in cases where regulation 64 (trade disputes) applies—

(a)by providing for the amount which would otherwise be payable by the employer for a tax period to be reduced by an amount of repayments (“R”) that cannot be made to employees in the tax period, and

(b)by providing—

(i)for amounts which would otherwise be payable in later tax periods to be increased, or

(ii)for amounts which would otherwise be recoverable in later tax periods to be reduced,

by a total of R.

(2) This regulation applies for consecutive tax periods—

(a)starting with the first tax period at the end of which there is an amount calculated as due to be repaid but which is required to be withheld by regulation 64(5) (tax to be withheld during strike action), and

(b)ending with the next tax period at the end of which no amount is required to be withheld by that regulation.

(3) Column 3 of Table 3 shows the amount payable under regulation [F2467G(2) [F25, as adjusted by regulation 67H(2) where appropriate,] or, as the case may be,] 68(2) in the cases set out in column 2 for the first and subsequent tax periods.

(4) The amount (if any) recoverable under regulation [F2767G [F28, as adjusted by regulation 67H(2) where appropriate,] or, as the case may be,] 68(3) must be reduced to the extent that it includes amounts—

(a)for which reduction was made under paragraph (3) in an earlier tax period, or

(b)which are otherwise being recovered.

(5) In this regulation—

• A is—

  (a)

  the total amount of tax which the employer was liable to deduct from relevant payments made by the employer in the tax period, plus

  (b)

  the total amount of tax for which the employer was liable to account in respect of notional payments made by the employer in that period under regulation 62(5) (notional payments);

• B is the total amount which the employer is liable to repay in the tax period, not including any amounts—

  (a)

  for which a reduction was made under paragraph (3) in an earlier tax period; or

  (b)

  which are being recovered under paragraph (4);

• P is the total of amounts calculated as due to be repaid in the tax period but required to be withheld during that tax period by regulation 64(5);

• Q is the total of amounts—

  (a)

  which, because of regulation 64(5)(b), are set off against tax due to be deducted in the tax period, and

  (b)

  which also, under paragraph (3), have reduced the amount payable in an earlier tax period.

Recovery from employee of tax not deducted by employerU.K.

72.—(1) This regulation applies if—

(a)it appears to the Inland Revenue that the deductible amount exceeds the amount actually deducted, and

(b)condition A or B is met.

(2) In this regulation [F29and regulations 72A and 72B]—

• “the deductible amount” is the amount which an employer was liable to deduct from relevant payments made to an employee in a tax period;

• “the amount actually deducted” is the amount actually deducted by the employer from relevant payments made to that employee during that tax period;

• “the excess” means the amount by which the deductible amount exceeds the amount actually deducted.

(3) Condition A is that the employer satisfies the Inland Revenue—

(a)that the employer took reasonable care to comply with these Regulations, and

(b)that the failure to deduct the excess was due to an error made in good faith.

(4) Condition B is that the Inland Revenue are of the opinion that the employee has received relevant payments knowing that the employer wilfully failed to deduct the amount of tax which should have been deducted from those payments.

(5) The Inland Revenue may direct that the employer is not liable to pay the excess to the Inland Revenue.

[F30(5A) Any direction under paragraph (5) must be made by notice (“the direction notice”), stating the date the notice was issued, to—

(a)the employer and the employee if condition A is met;

(b)the employee if condition B is met.

(5B) A notice need not be issued to the employee under paragraph (5A)(a) if neither the Inland Revenue nor the employer are aware of the employee’s address or last known address.]

(6) If a direction is made, the excess must not be added under regulation 185(5) or 188(3)(a) (adjustments to total net tax deducted for self-assessments and other assessments) in relation to the employee.

(7) If condition B is met, tax payable by an employee as a result of a direction carries interest, as if it were unpaid tax due from an employer, in accordance with [F31section 101 of the Finance Act 2009].

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F32Employer’s request for a direction and appeal against refusalU.K.

72A.—(1) In relation to condition A in regulation 72(3), the employer may by notice to the Inland Revenue (“the notice of request”) request that the Inland Revenue make a direction under regulation 72(5).

(2) The notice of request must—

(a)state—

(i)how the employer took reasonable care to comply with these Regulations; and

(ii)how the error resulting in the failure to deduct the excess occurred;

(b)specify the relevant payments to which the request relates;

(c)specify the employee or employees to whom those relevant payments were made; and

(d)state the excess in relation to each employee.

(3) The Inland Revenue may refuse the employer’s request under paragraph (1) by notice to the employer (“the refusal notice”) stating—

(a)the grounds for the refusal, and

(b)the date on which the refusal notice was issued.

(4) The employer may appeal against the refusal notice—

(a)by notice to the Inland Revenue,

(b)within 30 days of the issue of the refusal notice,

(c)specifying the grounds of the appeal.

(5) For the purpose of paragraph (4) the grounds of appeal are that—

(a)the employer did take reasonable care to comply with these Regulations, and

(b)the failure to deduct the excess was due to an error made in good faith.

(6) If on appeal under paragraph (4) [F33that is notified to the tribunal] it appears to the [F34tribunal] that the refusal notice should not have been issued [F35the tribunal] may direct that the Inland Revenue make a direction under regulation 72(5) in an amount the [F36tribunal determines] is the excess for one or more tax periods falling within the relevant tax year.

Employee’s appeal against a direction notice where condition A is metU.K.

72B.—(1) An employee may appeal against a direction notice under regulation 72(5A)(a)—

(a)by notice to the Inland Revenue,

(b)within 30 days of the issue of the direction notice,

(c)specifying the grounds of the appeal

(2) For the purpose of paragraph (1) the grounds of appeal are that—

(a)the employer did not act in good faith,

(b)the employer did not take reasonable care, or

(c)the excess is incorrect.

(3) On an appeal under paragraph (1) [F37that is notified to the tribunal, the tribunal] may—

(a)if it appears ... that the direction notice should not have been made, set aside the direction notice; or

(b)if it appears ... that the excess specified in the direction notice is incorrect, increase or reduce the excess specified in the notice accordingly.

Employee’s appeal against a direction notice where condition B is metU.K.

72C.—(1) An employee may appeal against a direction notice under regulation 72(5A)(b)—

(a)by notice to the Inland Revenue,

(b)within 30 days of the issue of the direction notice,

(c)specifying the grounds of the appeal.

(2) For the purpose of paragraph (1) the grounds of appeal are that—

(a)the employee did not receive the payments knowing that the employer wilfully failed to deduct the amount of tax which should have been deducted from those payments, or

(b)the excess is incorrect.

(3) On an appeal under paragraph (1) [F38that is notified to the tribunal, the tribunal] may—

(a)if it appears ... that the direction notice should not have been made, set aside the direction notice; or

(b)if it appears ... that the excess specified in the direction notice is incorrect, increase or reduce the excess specified in the notice accordingly.

Appeals: supplementary provisionsU.K.

72D.—(1) This regulation applies to appeals under regulations 72A(4), 72B, [F3972C, 72G and 81A].

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) [F40This paragraph applies if] in respect of the same error by an employer in relation to condition A in regulation 72(3)—

(a)more than one employee is appealing under regulation 72B; or

(b)there is an appeal by an employer under regulation 72A(4) and by an employee under regulation 72B

...

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F41(8) Where paragraph (4) applies or the appeal is material to the liability to tax of the employer and the employee, all the persons concerned are entitled to be parties to the appeal.]

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F42Conditions where regulation 72F appliesU.K.

72E.—(1) Regulation 72F applies where—

(a)[F43one or more employees have] received a relevant payment;

(b)it appears to HMRC that an amount intended to represent tax on the payment—

[F44(i)is likely to have been self-assessed by one or more of the employees, or]

(ii)has not been self-assessed, but has been paid under section 59A TMA (payments on account of income tax), section 559A of ICTA (treatment of sums deducted under s.559 (sub-contractors)) or section 62 of the Finance Act 2004 (treatment of sums deducted (sub-contractors));

(c)any of conditions A, B and C is met;

(d)a trigger event has occurred; and

(e)a trigger event did not occur before 6th April 2008.

(2) Condition A is that it appears to HMRC that the amount which the employer was liable to deduct—

(a)from the relevant payment; or

(b)in the case of a notional payment, from other relevant payments,

exceeds the amount actually deducted.

(3) Condition B is that it appears to HMRC that the amount for which the employer was required to account under regulation 62(5) (notional payments) in respect of the relevant payment exceeds the amount actually accounted for.

(4) Condition C is that—

(a)tax on the relevant payment was included in a determination under regulation 80 (determination of unpaid tax and appeal against determination); and

(b)the full amount of the determination is not paid within 30 days from the date on which the determination became final and conclusive.

(5) The following are trigger events—

(a)HMRC serve notice of a determination under regulation 80 that includes tax on the relevant payment;

(b)HMRC receive a return under section 8 of TMA (personal return) which includes a self-assessment which includes tax on the relevant payment as tax treated as deducted;

(c)HMRC receive—

(i)an amended return under section 9ZA of TMA (amendment of personal or trustee return by taxpayer), or

(ii)a claim under section 33 of TMA (error or mistake),

which includes tax on the relevant payment as tax treated as deducted;

(d)HMRC receive a letter of offer.

(6) In paragraph (5)—

“letter of offer” means an offer in writing by the employer to agree an amount in settlement of the employer’s liability to pay an amount that includes tax on the relevant payment;

“tax treated as deducted” has the meaning given by regulation 185(6).

(7) For the purposes of this regulation tax is self-assessed if—

(a)it is included in a return under section 8 of TMA which includes a self-assessment; and

(b)ignoring any relevant credit, the tax is or would be assessed as payable by way of income tax.

(8) In paragraph (7), “relevant credit” means—

(a)a payment made under section 59A of TMA (payments on account of income tax) or 59B (payment of income tax and capital gains tax); or

(b)tax deducted at source or tax treated as deducted (within the meaning given by regulation 185(6)).

Recovery from employee of tax that has been self-assessed etc.U.K.

72F.—(1) Where this regulation applies, HMRC may direct that the employer is not liable to pay an amount of tax to them.

(2) The direction may be in respect of one or more amounts that appear to HMRC to fall within regulation 72E(1)(b)(i) and (ii).

(3) A direction must be made by notice to both the employer and the employee, stating—

(a)the date the notice was issued;

[F45(b)the—

(i)amount (or amounts) within regulation 72E(1)(b) to which it relates, or

(ii)employment in respect of which the relevant payment within regulation 72E(1)(a) was received and in respect of which the amount within regulation 72E(1)(b)(i) is likely to have been self-assessed, and]

(c)which of conditions A, B and C in regulation 72E have been met.

(4) A direction may be combined with one or more other directions relating to the same employer and may be made by issuing one notice to the employer, but each employee must be issued with a separate notice.

(5) A notice need not be issued to the employee if neither HMRC nor the employer are aware of the employee’s address or last known address.

(6) The amount specified in a notice to the employee must not be added under regulation 185(5) or 188(3)(a) (adjustments to total net tax deducted for self-assessments and other assessments) in relation to the employee.

Employee’s appeal against a direction noticeU.K.

72G.—(1) An employee may appeal against a direction notice under regulation 72F—

(a)by notice to HMRC,

(b)within 30 days of the issue of the direction notice,

(c)specifying the grounds of the appeal.

(2) For the purposes of paragraph (1) the grounds of appeal are that—

(a)the employee did not receive a relevant payment;

(b)the amount specified in the notice is incorrect, because all or part of it did not fall within regulation 72E(1)(b)(i) or (ii);

(c)no trigger event within regulation 72E(5) occurred; or

(d)a trigger event within regulation 72E(5) occurred before 6th April 2008.

(3) On an appeal under paragraph (1) [F46that is notified to the tribunal, the tribunal] may—

(a)if it appears ... that the direction should not have been made, set aside the direction; or

(b)if it appears ... that the amount specified in the notice is incorrect, increase or reduce the amount accordingly.]

[F47Application of Regulation 72GBU.K.

72GA.—(1) Regulation 72GB applies where—

(a)an amount of income tax or corporation tax has been—

(i)paid, or

(ii)assessed

in respect of a payment received by the intermediary that is subsequently treated as a deemed direct payment,

(b)the deemed direct payment was made on or after 6th April 2017,

(c)HMRC are in receipt of one or more tax returns, which include an amount of tax that appears to be referable to that deemed direct payment,

(d)a trigger event has occurred, and

(e)the trigger event did not occur before 6th April 2024.

(2) The following are trigger events—

(a)HMRC serve notice of a determination made under regulation 80 of these Regulations (determination of unpaid tax and appeal against determination) that includes tax in respect of the deemed direct payment,

(b)HMRC receive a letter of offer,

(c)HMRC serve a recovery notice under Chapter 5 of Part 4 of these Regulations (debts arising under Chapter 10 of Part 2 of ITEPA), where it would be impractical to recover by way of a determination made under regulation 80, or

(d)when a determination made under regulation 80 becomes final and conclusive and that determination includes tax in respect of the deemed direct payment.

(3) In this regulation—

“intermediary” has the meaning given in section 61M(1)(c) of ITEPA;

“letter of offer” means an offer in writing by the deemed employer to agree an amount in settlement of the deemed employer’s liability to pay an amount that includes tax on the payment.

(4) In this regulation and regulations 72GB and 72GC—

“deemed direct payment” has the meaning given in section 61N of ITEPA.

(5) For the purposes of this regulation and regulations 72GB and 72GC, tax is assessed if it—

(a)is included in a return under section 8 of the Taxes Management Act 1970 which includes a self-assessment, or under Schedule 18 to the Finance Act 1998, and

(b)takes into account any reliefs, including reliefs from income tax, included in the return or returns.

Recovery of taxesU.K.

72GB.—(1) Where this regulation applies, HMRC may direct an amount to be treated as having been recovered from the payee and for that amount not to be recoverable from the deemed employer where—

(a)the deemed employer would otherwise be liable to pay an amount in consequence of being treated under section 61N(3) of ITEPA as having made a deemed direct payment to a worker (other than by virtue of section 61WA of ITEPA), and

(b)an amount of income tax or corporation tax has been paid or assessed in respect of the deemed direct payment.

(2) The amount referred to in the opening words of paragraph (1) may be the best estimate which can reasonably be made by an officer of Revenue and Customs (whether generally or specifically) of the amount referred to in paragraph (1)(b).

(3) The direction may be in respect of one or more amounts of income tax or corporation tax that fall within regulation 72GA(1)(a).

(4) A direction must be made by notice to the deemed employer and the payee, subject to paragraph (7), stating—

(a)the date the notice was issued,

(b)the amount to be treated as having been recovered, and

(c)the services provided in respect of which the deemed direct payment within regulation 72GA(1)(a) was treated as having been made.

(5) A direction may be combined with one or more directions relating to the same deemed employer and may be made by issuing one notice to that deemed employer, but each payee must be issued with a separate notice.

(6) The amount referred to in paragraph (4)(b) will be the overall recovered amount.

(7) A notice need not be issued to a payee if HMRC or the deemed employer are unaware of the current address of the payee.

(8) The payee may not—

(a)make a claim for the repayment of, or relief in respect of, the amount of income tax or corporation tax referred to in regulation 72GA(1)(a), or

(b)deduct, or set off, the amount of tax referred to in regulation 72GA(1)(a) from or against any income tax or corporation tax liability.

Appeal against a direction noticeU.K.

72GC.—(1) A payee may appeal against a direction notice under regulation 72GB—

(a)by notice to HMRC,

(b)within 30 days of the issue of the direction notice, and

(c)specifying the grounds of appeal.

(2) For the purposes of paragraph (1), the grounds of appeal are that—

(a)the payee did not receive the deemed direct payment,

(b)no tax has been paid or assessed on the deemed direct payment,

(c)the amount that is treated as being recovered from the payee is incorrect, or

(d)none of the trigger events set out in regulation 72GA occurred.

(3) On an appeal under paragraph (1) that is notified to the tribunal, the tribunal may—

(a)if it appears that the direction should not have been made, set aside the direction,

(b)if it appears that the amount specified in the notice is incorrect, increase or reduce the amount accordingly, or

(c)if it appears that the direction was correctly made, uphold the direction.]