The Income Tax (Pay As You Earn) Regulations 2003

PART 1U.K.INTRODUCTION

Citation and commencementU.K.

Citation and commencementU.K.

1.  These Regulations may be cited as The Income Tax (Pay As You Earn) Regulations 2003 and shall come into force on 6th April 2004.

InterpretationU.K.

InterpretationU.K.

2.—(1) In these Regulations, unless the context otherwise requires—

“additional pay” means the appropriate amount, established from an employee’s code (where it is a K code not used on the cumulative basis) and the tax tables, to be added to the relevant payments made to an employee in order to determine the taxable payments;

[F1“additional rate” in relation to the charging of income tax for any tax year, means the rate of income tax determined under section 6(2) of ITA [F2, except where the employee is a Welsh taxpayer where it means the Welsh additional rate of income tax calculated under section 6B of that Act] F3...;]

“agency” has the meaning given in section 44 of ITEPA;

[F4“agency worker” means a worker who is treated by section 44 of ITEPA(1) as holding an employment with the agency for income tax purposes;]

“approved method of electronic communications” has the meaning given in regulation 189;

“basic rate”, in relation to the charging of income tax for any tax year, means the rate of income tax determined under [F5section 6(2) of ITA, except where [F6—]

“Board of Inland Revenue” means the Commissioners of Inland Revenue (as to which see in particular the Inland Revenue Regulation Act 1890(2));

[F8“the client” has the meaning given in section 44 of ITEPA, and cognate expressions shall be construed accordingly;]

[F9“closed tax year” means any tax year preceding the current year, and cognate expressions shall be construed accordingly;]

“code” and related expressions have the meanings given in regulation 7;

[F10“combined amount” means an amount which includes tax due under these regulations and one or more of the following—

“cumulative basis” means the basis of deduction or repayment of tax provided for in regulation 23;

“deductions working sheet” means—

“earnings” has the meaning given in sections 62 and 721(7) of ITEPA;

“electronic communications” has the meaning given in regulation 189;

“employee’s code” has the meaning given in regulation 8(1);

“employer reference” means the combination of letters, numbers or both used by the Inland Revenue to identify an employer for the purposes of these Regulations;

“employer’s PAYE reference”, in relation to an employer, means the combination of the employer’s employer reference and the Inland Revenue office number;

“employment”, subject to regulations 10 to 12, has the meaning given in sections 4 and 5 of ITEPA; and “employer” and “employee” have corresponding meanings;

[F13“employment intermediary” has the meaning given in section 716B(2) of ITEPA;]

“excluded business expenses” has the meaning given in regulation 5;

“family” and “family or household”, in relation to a person, have the meanings given in section 721(4) and (5) of ITEPA;

“free pay” means the appropriate amount, established from an employee’s code (where not used on the cumulative basis) and the tax tables, to be subtracted from relevant payments to arrive at taxable payments (and accordingly represents an appropriate part of reliefs allowable against those payments);

“general earnings” has the meaning given in section 7(3) of ITEPA;

“higher rate”, in relation to the charging of income tax for any tax year, means the rate of income tax determined under [F14section 6(2) of ITA [F15, except where the employee is a Welsh taxpayer where it means the Welsh higher rate of income tax determined under section 6B of that Act] F16...];

[F9“HMRC” means Her Majesty’s Revenue and Customs;]

“ICTA” means the Income and Corporation Taxes Act 1988(3);

“Inland Revenue” means any officer of the Board of Inland Revenue;

“Inland Revenue office”, in relation to an employer, means the office of the Inland Revenue from which codes are normally issued to the employer;

“Inland Revenue office number” means the number which identifies an employer’s Inland Revenue office;

[F10“ITA” means the Income Tax Act 2007;]

“ITEPA” means the Income Tax (Earnings and Pensions) Act 2003(4);

[F17“large employer” has the meaning given in regulation 198A;]

[F18“lower earnings limit” means the lower earnings limit for Class 1 contributions for the purposes of section 5(1) of the Social Security Contributions and Benefits Act 1992;]

“national insurance number” means the national insurance number allocated within the meaning of regulation 9 of the Social Security (Crediting and Treatment of Contributions, and National Insurance Numbers) Regulations 2001(5);

“net PAYE income” has the meaning given in regulation 3;

“non-cumulative basis” means the basis of deduction of tax provided for in regulation 27;

[F19“non-Real Time Information employer” means an employer other than one within regulation 2A;]

[F19“non-Real Time Information pension payer” means a pension payer other than one within regulation 2B;]

[F20“notice” means as follows and “notify” must be read accordingly—

“notional payment” has the meaning given in section 710(2)(a) of ITEPA;

“objects” means gives a notice of objection to the Inland Revenue;

“official computer system” has the meaning given in regulation 189;

“other payee” means a person receiving relevant payments in a capacity other than employee, agency worker or pensioner;

“other payer” means a person making relevant payments in a capacity other than employer, agency or pension payer;

[F22“overriding limit” means the limit on the amount of tax to be deducted from a relevant payment and is an amount equal to 50% of the amount of the relevant payment;]

“PAYE income” has the meaning given in section 683 of ITEPA;

“PAYE pension income” has the meaning given in section 683(3) of ITEPA;

“PAYE threshold” must be determined in accordance with regulation 9;

“payee” means an employee, agency worker, pensioner or other payee;

“payer” means an employer, agency, pension payer or other payer;

“pension” means a pension, annuity or other payments of PAYE pension income;

“pensioner” means a person receiving PAYE pension income;

“pension payer” means a person making payments of PAYE pension income;

“PSA” means a PAYE settlement agreement made in accordance with regulation 105;

“qualifying general earnings”, in relation to a PSA, has the meaning given in regulation 106;

[F9“qualifying payment” means a payment which becomes retrospective employment income as a relevant payment (including a notional payment);]

[F19“Real Time Information employer” has the meaning given in regulation 2A;]

[F19“Real Time Information pension payer” has the meaning given in regulation 2B;]

F23...

“relevant payments” has the meaning given in regulation 4;

“relevant pension payments” has the meaning given in regulation 6;

[F9“the relevant time”, in relation to retrospective employment income, has the meaning given by section 710(7) of ITEPA, as modified by subsection (7A) of that section, but subject to section 94(5)(c) of the Finance Act 2006;]

“reliefs from income tax” includes allowances and deductions;

[F9“retrospective contributions regulations” has the meaning given by regulation 1(2) of the SSC Regulations;]

[F9“retrospective employment income” means payments which are retrospectively treated as payments of employment income by virtue of a retrospective tax provision;]

[F9“retrospective tax provision” means a provision of the Income Tax Acts charging to income tax amounts of employment income paid before the enactment containing the provision was passed;]

[F24“Scottish basic rate” means the Scottish basic rate of income tax for a tax year set by a Scottish rate resolution of the Scottish Parliament under section 80C of the Scotland Act 1998;

“Scottish lower rate” means any rate of income tax for a tax year set by a Scottish rate resolution of the Scottish Parliament under section 80C of the Scotland Act 1998 which is lower than the Scottish basic rate for that tax year]

F25...

[F26“Scottish taxpayer” has the same meaning as in section 989 of ITA (the definitions);]

[F27“Scottish upper rate” means any rate of income tax for a tax year set by a Scottish rate resolution of the Scottish Parliament under section 80C of the Scotland Act 1998 which is higher than the Scottish basic rate for that tax year;]

[F18“seconded expatriate” means an employee meeting one of the following descriptions—

[F28“specified date” for the purposes of Chapter 3 of Part 10, has the meaning given in regulation 198A;]

[F9“SSC Regulations” means the Social Security (Contributions) Regulations 2001;]

F29...

[F30“Student Loan Regulations” means the Education (Student Loans) (Repayment) Regulations 2009 or, in Northern Ireland, the Education (Student Loans) (Repayment) Regulations (Northern Ireland) 2009;]

“taxable payments” means relevant payments reduced by free pay or, as the case may be, increased by additional pay (where the employee’s code is not used on the cumulative basis);

“tax month” means the period beginning on the 6th day of a calendar month and ending on the 5th day of the following calendar month;

“tax not deducted because of the overriding limit” means any tax—

“tax period” means—

“tax quarter” means any of the following (inclusive) periods—

• 6th April to 5th July,

• 6th July to 5th October,

• 6th October to 5th January, and

• 6th January to 5th April;

“tax tables” means the tax tables prepared by the Board of Inland Revenue under section 685 of ITEPA(6);

“tax week” means 6th April to 12th April (inclusive) and each successive period of 7 days, except that the final tax week in a tax year (“Week 53”) is just the last day of the tax year (or last 2 days in a leap year);

“tax year” means a year for which any Act provides for income tax to be charged;

“TMA” means the Taxes Management Act 1970(7);

“total additional pay to date” means the appropriate amount, established from an employee’s code (where it is a K code to be used on the cumulative basis) and the tax tables, to be added to the total payments to date in order to determine the total taxable payments to date;

“total free pay to date”, in relation to any date, means the appropriate amount, established from an employee’s code (where used on the cumulative basis) and the tax tables, to be subtracted from total payments to date to arrive at total taxable payments to date (and accordingly represents an appropriate part of reliefs allowable against those payments);

“total net tax deducted”, in relation to the relevant payments made to an employee during any period, means the total tax deducted from those payments plus any tax accounted for in accordance with regulation 62(5) (notional payments), less any tax repaid to the employee;

“total payments to date”, in relation to any date, means the sum of all relevant payments made by the employer to the employee from the beginning of the tax year up to and including that date;

“total tax to date” means the tax due at any date in accordance with the appropriate tax tables in respect of any total taxable payments to date;

“total taxable payments to date” means total payments to date reduced by total free pay to date or, as the case may be, increased by total additional pay to date (where the employee’s code is used on the cumulative basis);

“trade dispute” has the meaning given in section 35(1) of the Jobseekers Act 1995(8) or, in Northern Ireland, in article 2(2) of the Jobseekers (Northern Ireland) Order 1995(9).

[F32“tribunal” means the First-tier Tribunal or, where determined by or under Tribunal Procedure Rules, the Upper Tribunal.]

[F33“United Kingdom continental shelf” means the area designated under section 1(7) of the Continental Shelf Act 1964.]

[F34“Welsh rate” means a rate set by the National Assembly for Wales for the tax year under section 116D of the Government of Wales Act 2006 (income tax);

“Welsh taxpayer” has the same meaning as in section 116E of the Government of Wales Act 2006 (Welsh taxpayers).]

(2) References in these Regulations to income tax in respect of PAYE income (however expressed) are references to income tax in respect of that income if reasonable assumptions are, when necessary, made about other income.

[F35Real Time Information employersU.K.

2A.—(1) The following are Real Time Information employers—

(a)an employer who has entered into an agreement with HMRC to comply with the provisions of these Regulations which are expressed as relating to Real Time Information employers,

(b)an employer within paragraph (2),

F36(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and

(d)on and after 6th October 2013, all employers [F37, except employers within paragraph (3)].

(2) An employer is within this paragraph if the employer has been given a general or specific direction by the Commissioners for Her Majesty’s Revenue and Customs before 6th October 2013 to deliver to HMRC returns under regulation 67B (real time returns of information about relevant payments).

[F38(3) An employer is within this paragraph if the employer—

(a)has an existing special arrangement under regulation 141 (direct collection and special arrangements), and

(b)has not been given a direction under paragraph (2) by the Commissioners for Her Majesty’s Revenue and Customs.]

Real Time Information pension payersU.K.

2B.—(1) The following are Real Time Information pension payers—

(a)a pension payer who has entered into an agreement with HMRC to comply with the provisions of these Regulations which are expressed as relating to Real Time Information pension payers or Real Time Information employers,

(b)a pension payer within paragraph (2),

F39(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)on and after 6th October 2013, all pension payers.

(2) A pension payer is within this paragraph if the pension payer has been given a general or specific direction by the Commissioners for Her Majesty’s Revenue and Customs before 6th October 2013 to deliver to HMRC returns under regulation 67B (real time returns of information about relevant payments).]

Net PAYE incomeU.K.

3.—(1) “Net PAYE income” means PAYE income less any—

(a)allowable pension contributions, and

(b)allowable donations to charity.

(2) In paragraph (1)—

[F40allowable pension contributions“ means any contribution under a registered pension scheme which is withheld from the payment of PAYE income which is allowed to be deducted from employment income by the sponsoring employer under section 193(2) of the Finance Act 2004 (relief under net pay arrangements);

“registered pension scheme” and “sponsoring employer” have the meanings given by section 150(2) and (6) respectively, of the Finance Act 2004.]

“allowable donations to charity” means any donation which is withheld from the payment of PAYE income and for which a deduction must be allowed under section 713 of ITEPA (donations to charity: payroll deduction scheme).

Relevant paymentsU.K.

4.—(1) In these Regulations, any reference (however expressed) to relevant payments means payments of, or on account of, net PAYE income, except payments of, or on account of,—

(a)PAYE social security income, except in so far as it is provided for in Part 8,

(b)United Kingdom social security pensions,

(c)excluded relocation expenses,

F41(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e)excluded pecuniary liabilities, and

(f)excluded notional payments.

(2) In paragraph (1)—

F42...

“excluded notional payments” means notional payments which an employer is treated as making by section 694 or 695 of ITEPA (non-cash vouchers and credit tokens) as a result of an employee using a non-cash voucher or credit token on behalf of the employer, except where the voucher or token is used as, or as part of, any scheme or arrangement the purpose, or one of the main purposes, of which is—

“excluded pecuniary liabilities” means payments made to a person other than an employee to meet the employee’s liability to that other person, but which are not made—

“excluded relocation expenses” means payments in respect of removal expenses, as defined by section 272 of ITEPA (removal benefits and expenses to which section 271 applies), if, and to the extent that, they are payments of net PAYE income;

“PAYE social security income” has the meaning given in section 683(5) of ITEPA;

“United Kingdom social security pensions” means income which is taxable income in accordance with section 578 of ITEPA (UK social security pensions).

Excluded business expensesU.K.

F435.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Relevant pension paymentsU.K.

6.  In these Regulations, any reference (however expressed) to relevant pension payments means relevant payments in respect of PAYE pension income.

Meaning of “code” etcU.K.

7.—(1) In these Regulations, “code” means—

(a)a combination of letters, numbers or both for use in accordance with the tax tables to establish free pay, additional pay, total free pay to date or total additional pay to date;

(b)any of the special codes (whether expressed in words or represented by a combination of letters, numbers or both) for use in accordance with the tax tables or otherwise.

(2) “K code” means a code which gives rise to additional pay or total additional pay to date.

[F44(2A) “S code” means a code which effects deductions of tax at the rates [F45set by a Scottish rate resolution of the Scottish Parliament under section 80C of the Scotland Act 1998].]

[F46(2B) “C code” means a code which effects deductions of tax at the rates calculated under section 6B of ITA.]

(3) The special codes are—

(a)the basic rate code, which effects deductions of tax wholly at the basic rate;

(b)the higher rate code, which effects deductions of tax wholly at the higher rate;

[F47(ba)the additional rate code, which effects deductions of tax wholly at the additional rate;]

[F48(bb)the appropriate Scottish upper rate code, which effects deductions of tax wholly at a Scottish upper rate for a Scottish taxpayer;]

(c)the nil tax code, which requires no deductions of tax;

[F49(ca)the 0T code, which without allowing for personal allowances, effects deductions of tax so that during the tax year the amounts subject to deductions are in accordance with section 10 of ITA (income charged at the basic, higher and additional rates: individuals) or section 11A of ITA (income charged at Scottish rates);]

[F50(d)the emergency code, which, after allowing for the personal allowance, effects deductions of tax at—

[F51(i)the basic rate, or

(ii)the basic and higher rates, or

(iii)the basic, higher and additional rates

so that during the tax year the amounts subject to deductions at the rate or rates concerned are in accordance with section 10 of ITA (income charged at the basic, higher and additional rates: individuals);]

(e)the emergency IB codes which, after allowing for the personal allowance and the blind person’s allowance, effect deductions at the basic rate, so that during the tax year the amounts subject to deductions at that rate are in accordance with section 10 of ITA.]

[F52(4) In paragraph (3)—

[F53“appropriate Scottish upper rate code” means a Scottish upper rate code which effects deductions of tax from an employee who is a Scottish taxpayer at a Scottish upper rate which is considered by HMRC to apply where they have reason to believe that the employee will be chargeable at that rate on all or a substantial part of the employee’s relevant payments;]

“blind person’s allowance” means an allowance claimed under either section 265 of ICTA (blind person’s allowance) or section 38 of ITA (blind person’s allowance);

“personal allowance” means an allowance claimed under either section 257(1) of ICTA (personal allowance) or section 35 of ITA (personal allowances for those aged under 65).]

Employee’s codeU.K.

8.—(1) An employee’s code is the code—

(a)issued to an employer for use in respect of the employee for a tax year,

(b)applied by these Regulations for use by an employer in respect of the employee, or

(c)issued to an employee in accordance with regulation 142 (direct collection).

(2) A code is issued to an employer if it is contained in a document that is sent—

(a)to the employer, or

(b)to a person acting on behalf of the employer,

by the Inland Revenue, and any code so issued is received by the employer for the purposes of these Regulations.

PAYE thresholdU.K.

9.—(1) The rules set out in Table 1 apply in order to determine whether a relevant payment made by an employer to an employee is a relevant payment which exceeds the PAYE threshold.

(2) Rules 1 to 5 apply if the employer normally pays the employee at regular intervals.

(3) If the employer does not normally pay the employee at regular intervals—

(a)rule 6 applies to determine whether a relevant payment made less than a week since the previous relevant payment exceeds the PAYE threshold, and

(b)rule 7 applies to determine whether any other relevant payment exceeds the PAYE threshold.

(4) Regulations 24 and 30 (employee not paid weekly or monthly)—

(a)apply for the purpose of establishing an employee’s normal payment interval, but

(b)must otherwise be ignored for the purpose of determining whether a relevant payment exceeds the PAYE threshold.

(5) If an employee has more than one normal payment interval in respect of payments made by the same employer, the rules must be applied on the basis of the shorter or shortest of those intervals.

(6) If an employee’s normal payment interval is longer than a year, the rules must be applied as if the normal payment interval were a year.

(7) “Weekly PAYE threshold” means 1/52 of the personal allowance specified in section 257(1) of ICTA, rounded to the nearest pound.

(8) “Monthly PAYE threshold” means 1/12 of the personal allowance specified in section 257(1) of ICTA, rounded to the nearest pound.

(9) The “corresponding proportion of the weekly PAYE threshold” is established by dividing the number of days in the payment interval by 7, and multiplying the result by the weekly PAYE threshold.

Application to payers and payeesU.K.

Application to agencies and agency workersU.K.

10.—(1) For the purposes of these Regulations—

(a)agencies are treated as employers; and

(b)agency workers are treated as employees.

(2) For the purposes of the regulations listed in paragraph (3), an agency ceases to employ an agency worker at the earlier of—

(a)the end of the relationship between the agency and agency worker, or

(b)the end of a period of 3 months during which the agency makes no relevant payments to the agency worker,

and not each time the agency worker stops providing services to a client of the agency.

(3) The regulations are—

(4) The following regulations do not apply to agencies or agency workers in their capacity as such—

Application to pension payers and pensionersU.K.

11.—(1) For the purposes of these Regulations—

(a)pension payers are treated as employers;

(b)pensioners are treated as employees; and

(c)a pensioner’s “employment” with a pension payer starts when the pension starts and ends when the pension ends.

(2) The following regulations do not apply to pension payers or pensioners in their capacity as such—

Application to other payers and payeesU.K.

12.—(1) For the purposes of these Regulations—

(a)other payers are treated as employers;

(b)other payees are treated as employees; and

(c)an other payee’s “employment” with an other payer starts when relevant payments start and ends when relevant payments end.

(2) The following regulations do not apply to other payers or other payees in their capacity as such—

(3) Paragraph (2) is subject to regulation 91(9) (termination awards: former employers and employees).

(4) The following regulation does not apply to other payees in their capacity as such—

PART 2U.K.CODES

Determination of codeU.K.

Determination of code by Inland RevenueU.K.

13.  The Inland Revenue must determine the code for use by an employer in respect of an employee for a tax year.

Matters relevant to determination of codeU.K.

14.—(1) If the Inland Revenue determine a code under this regulation, they must have regard to the following matters so far as known to them—

(a)the reliefs from income tax to which the employee is entitled for the tax year in which the code is determined, so far as the employee’s title to those reliefs has been established at the time of the determination;

(b)any PAYE income of the employee (other than the relevant payments in relation to which the code is being determined);

(c)any tax overpaid for any previous tax year which has not been repaid;

(d)any tax remaining unpaid for any previous tax year which is not otherwise recovered;

(e)any tax repaid to the employee in excess of the amount properly due to the employee which may be recovered as if it were unpaid tax under section 30(1) of TMA(10) (recovery of overpayment of tax etc) and which is not otherwise recovered;

(f)unless the employee objects, any other income of the employee which is not PAYE income; and

(g)such other adjustments as may be necessary to secure that, so far as possible, the tax in respect of the employee’s income in relation to which the code is determined will be deducted from the relevant payments made during that tax year.

(2) If the Inland Revenue determine the code before the beginning of the tax year for which it is determined, the Inland Revenue—

(a)must have regard to any expected change in the amount of any relief referred to in paragraph (1)(a), but

(b)may disregard any such relief if they are not satisfied that the employee will be entitled to it for the tax year for which the code is determined.

(3) Paragraphs (1)(c) and (d) are subject to regulations 186 and 187 (recovery and repayment: adjustment of employee’s code).

[F58Determination of code in respect of recovery of relevant debtsU.K.

14A.—(1) HMRC may determine a code so as to effect recovery of all or part of a relevant debt within the meaning of section 684 of ITEPA (sums owed to HMRC).

(2) A determination in reliance on paragraph (1) does not prevent recovery by other means (whether or not under a provision of TMA) of all or any part of a relevant debt that is not recovered by deduction in accordance with the code (whether or not it was at any stage expected to be recovered by deduction).

(3) Sums deducted or to be deducted as a result of a determination made in reliance on paragraph (1) are to be treated, for the purposes of employers’ obligations and enforcement, in the same way as amounts of tax which the employer is liable to pay under provisions of these Regulations (so, for example, regulation 84 applies for the purposes of recovery).

(4) Sums deducted as a result of a determination made in reliance on paragraph (1) are to be treated for the purposes of interest on the relevant debt as having been paid on the first day of the tax year in respect of which the determination is made.]

[F59Determination of code in respect of high income child benefit chargeU.K.

14B.  HMRC may determine a code, if and to the extent that the payee does not object, to secure that—

(a)income tax payable for a tax year by the payee by virtue of section 681B of ITEPA (high income child benefit charge) is deducted from PAYE income of the payee paid during that year, and

(b)repayments are made in a tax year in respect of any amounts overpaid on account of income tax under that section for that tax year.]

[F60Determination of code in respect of recovery of tax credit debtsU.K.

14C.—(1) HMRC may determine a code, if and to the extent that the payee does not object, to effect the recovery of all or part of a tax credit debt.

(2) Sums deducted or to be deducted as a result of a determination made in reliance on paragraph (1) are to be treated, for the purposes of employers’ obligations and enforcement, in the same way as amounts of tax which the employer is liable to pay under provisions of these Regulations (so, for example, regulation 84 applies for the purposes of recovery).

(3) Sums deducted as a result of a determination made in reliance on paragraph (1) are to be treated for the purposes of interest on the tax credit debt as having been paid on the first day of the tax year in respect of which the determination is made.

(4) In this regulation “tax credit debt” means child tax credit or working tax credit that the payee is liable to repay to the Commissioners under or by virtue of an enactment.

Recovery of debts: overall limitU.K.

14D.—(1) This regulation applies where HMRC determines a code under, or by reference to, one or both of the following provisions—

(a)regulation 14A(1) (determination of code in respect of recovery of relevant debts); or

(b)regulation 14C(1) (determination of code in respect of recovery of tax credit debts).

(2) Column 2 of Table 1A sets out the total amount of debt that may be recovered from an employee (“E”) under a code to which this regulation applies, by reference to the expected amount of PAYE income of E in the tax year for which that code is determined.

(3) In this regulation the “total amount of debt” means the sum recovered or to be recovered by virtue of a code determined under, or by reference to, one or both of regulations 14A(1) or 14C(1).]

Flat rate codesU.K.

15.—[F61(A1) HMRC may determine that the code for use by an employer in respect of an employee for a tax year is the additional rate code, if they have reason to believe that the employee will be chargeable at the additional rate on all or a substantial part of the employee’s relevant payments.]

(1) The Inland Revenue may determine that the code for use by an employer in respect of an employee for a tax year is the higher rate code, if they have reason to believe that the employee will be chargeable at the higher rate on all or a substantial part of the employee’s relevant payments.

(2) The Inland Revenue may determine that the code for use by an employer in respect of an employee for a tax year is the basic rate code, if they have reason to believe that the employee will be chargeable at the basic rate on all or a substantial part of the employee’s relevant payments.

[F62(2A) HMRC may determine that the code for use by an employer in respect of an employee who is a Scottish taxpayer is an appropriate Scottish upper rate code if they have reason to believe that the employee will be chargeable at a Scottish upper rate on all or a substantial part of the employee’s relevant payments.]

(3) The Inland Revenue may determine that the code for use by an employer in respect of an employee for a tax year is the nil tax code, if—

(a)the employee’s PAYE income will be taken into account as taxable income other than PAYE income in any assessment,

(b)the Inland Revenue are not satisfied that the employee’s income will be chargeable, or

(c)the Inland Revenue have reason to believe that the employee will be entitled to a deduction under Chapter 6 of Part 5 of ITEPA (deductions from seafarers' earnings) in respect of the employee’s PAYE income or so much of it as remains after any deductions under [F63sections 188 to 195 of the Finance Act 2004 (members' contributions).]

(4) References in this regulation to an employee’s relevant payments, PAYE income and income are references to the payments or income in respect of which the employee’s code is being determined for the purposes of the employment in question.

[F64(4A) For the purposes of this regulation an “appropriate Scottish upper rate code” has the meaning given in regulation 7(4).]

Continued application of employee’s codeU.K.

16.—(1) If the Inland Revenue determine that the code for use by an employer in respect of an employee for a tax year remains the same as at the previous 5th April, the Inland Revenue need not issue a code to the employer.

(2) If for any tax year the employer does not receive a code for an employee who was in that employer’s employment on the previous 5th April, the code which applied on that date is treated as having been issued by the Inland Revenue for the tax year in question.

Notice to employee of codeU.K.

17.—(1) The Inland Revenue must give notice to an employee of the code which they have determined for use in respect of that employee for any tax year.

(2) But notice need not be given if—

(a)the code for use in respect of the employee remains the same as at the previous 5th April; ...

[F65(b)the change in the code is solely because of an alteration or proposed alteration—

(i)in the rates of any of the personal reliefs allowable under Chapters 2 (personal allowance etc.) and 3 (tax reductions etc.) of Part 3 of the Income Tax Act 2007; or

(ii)in the tax tables;

(c)the employee’s PAYE income is not chargeable to tax; or

(d)the employee does not have a liability to tax in respect of any PAYE income.]

Appeals and amendmentU.K.

Objections and appeals against employee’s codeU.K.

18.—(1) An employee who objects to the determination of a code must state the grounds of objection.

(2) On receiving the notice of objection the Inland Revenue may amend the determination of the code by agreement with the employee.

(3) If the Inland Revenue and employee do not reach agreement, the employee may appeal ... against the determination of the code by giving notice to the Inland Revenue.

(4) [F66On an appeal that is notified to the tribunal, the tribunal] must determine the code in accordance with these Regulations.

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

Amendment of codeU.K.

19.—(1) Paragraph (2) applies if the code for use by an employer in respect of an employee is found to be inappropriate because the actual circumstances are different from the circumstances by reference to which it was determined, whether by the Inland Revenue or the [F67tribunal].

(2) The Inland Revenue may, and if required by the employee must, amend the code by reference to the actual circumstances.

(3) The Inland Revenue must give notice of the amended code to the employee by the date on which the notice under regulation 20(1) is issued to the employer.

[F68(4) But notice need not be given—

(a)if the change in the code is because of an alteration or a proposed alteration—

(i)in the rates of any of the personal reliefs allowable under Chapters 2 (personal allowance etc.) and 3 (tax reductions etc.) of Part 3 of the Income Tax Act 2007; or

(ii)in the tax tables; or

(b)if as a consequence of any change to the code—

(i)the employee’s PAYE income is not chargeable to tax; or

(ii)the employee does not have a liability to tax in respect of any PAYE income.]

(5) Regulation 18 (objections and appeals) applies in relation to the amended code as it applies in relation to the original code.

(6) Regulation 18 also applies if the Inland Revenue do not agree that the circumstances have changed and so refuse to amend the code in accordance with paragraph (2).

Notice to employer of amended codeU.K.

20.—(1) If the code for use by an employer in respect of an employee is amended after notice of it has been issued to the employer, the Inland Revenue must issue the amended code to the employer.

(2) An amended code is issued to an employer if it is contained in a document that is sent to the employer or a person acting on behalf of the employer by the Inland Revenue, and any code so issued is received by the employer for the purposes of these Regulations.

(3) On making any subsequent relevant payment to the employee, the employer must deduct or repay tax by reference to the amended code.

(4) Paragraphs (5) and (6) apply if there is a change or proposed change in the rates of any of the personal reliefs allowable under sections 257 and 257A of ICTA (personal allowance and married couple’s allowance).

(5) If the change or proposed change relates to the current tax year, the Inland Revenue may give notice requiring the employer, with effect from the date specified in the notice, to amend specified codes as directed.

(6) If the change relates to the following tax year, the Inland Revenue may give notice requiring the employer to carry forward to the following tax year specified codes of the current tax year and adjust them as directed in the notice.

(7) A code which has—

(a)been amended by virtue of paragraph (5) in respect of the current tax year, or

(b)been carried forward to the following tax year and adjusted by virtue of paragraph (6),

is treated as having been determined and issued by the Inland Revenue as the employee’s code for that tax year.

(8) A notice under paragraphs (5) and (6) may be issued to the employer or to a person acting on behalf of the employer.

PART 3U.K.DEDUCTION AND REPAYMENT OF TAX

CHAPTER 1U.K.DEDUCTION AND REPAYMENT

Deduction and repayment by reference to employee’s codeU.K.

Deduction and repayment of tax by reference to employee’s codeU.K.

21.—(1) On making a relevant payment to an employee during a tax year, an employer must deduct or repay tax in accordance with these Regulations by reference to the employee’s code, if the employer has one for the employee.

(2) The employer must deduct or repay tax by reference to the employee’s code, even if the code is the subject of an objection or appeal.

The cumulative basisU.K.

The cumulative basisU.K.

22.  An employer must deduct or repay tax on the cumulative basis, unless these Regulations provide otherwise.

Cumulative basis: deduction and repaymentU.K.

23.—(1) This regulation provides for deductions and repayments on the basis of total payments to date (the cumulative basis).

(2) In this regulation—

(a)TT is the total tax to date relating to an employee;

(b)UT is any tax not deducted because of the overriding limit when the last relevant payment was made to the employee, and is nil if the payment in question is the first relevant payment to the employee in any tax year;

(c)PT is the previous total tax to date relating to the employee, and is nil if the payment in question is the first relevant payment to the employee in any tax year.

(3) The employer must, before making any relevant payment to the employee, calculate TT.

(4) If TT + UT exceeds PT, the employer must deduct the excess from the relevant payment on making the payment.

(5) But ... the deduction is not to exceed the overriding limit, subject to 62(6) (notional payments).

(6) If TT + UT is less than PT, the employer must repay the difference to the employee on making the payment, subject to regulations 25(4) (extra payment made before main payment) and 64 (trade disputes).

(7) If TT + UT equals PT, the employer must neither deduct nor repay tax when making the payment.

(8) “Previous total tax to date” means the total tax to date corresponding to the employee’s total payments to date and the employee’s code—

(a)at the date of the last preceding relevant payment, or

(b)if later, at the date on which the employer complied with this regulation as if a relevant payment had been made.

(9) But—

(a)if the employee’s code is an amended code, and

(b)the employee’s previous code was not used on the cumulative basis,

“previous total tax to date” means the total net tax deducted by the employer.

(10) Paragraphs (2)(c), (8) and (9) are subject to regulations 43(9) and (10), 52(11) and (12), 53(4) and 61(4) (which modify the meaning of previous total tax to date in certain circumstances).

Cumulative basis: employee not paid weekly or monthlyU.K.

24.—(1) This regulation applies if—

(a)an employer normally makes main relevant payments to an employee at regular intervals which are longer than a week, other than monthly, and

(b)the employee’s code is used on the cumulative basis.

(2) The first main relevant payment in a tax year is treated for the purposes of calculating the deduction or repayment of tax as having been made at the end the period which—

(a)starts on the first day of the tax year, and

(b)finishes at the end of the employee’s normal regular payment interval.

(3) Subsequent main relevant payments in the tax year are treated for the purposes of calculating the deduction or repayment of tax as having been made at the end of the period which—

(a)starts the day after the date on which the previous main relevant payment is treated as having been made (by paragraph (2) or this paragraph), and

(b)finishes at the end of the employee’s normal regular payment interval or the last day of the tax year (if earlier).

(4) If the employee’s main relevant payments are normally made at regular intervals which are longer than a year, any such payment in a tax year is treated, for the purposes of calculating the deduction or repayment of tax, as made on the last day of that tax year.

(5) But, in every case, the employer must record the actual date of every payment in the deductions working sheet.

(6) This regulation does not apply if the payment falls within regulation 31(1) (payments in short payment periods).

Cumulative basis: subsidiary PAYE income of employee paid weekly or at greater intervalsU.K.

25.—(1) This regulation applies if—

(a)an employee’s main relevant payments are normally made at regular intervals of a week or more,

(b)the employee’s code is used on the cumulative basis, and

(c)the employer makes a payment in respect of overtime or other extra earnings (the “extra payment”).

(2) For the purposes of calculating the deduction or repayment of tax, the extra payment is treated as made on the same date as that on which the main relevant payment in the payment period is due to be paid or is due to be treated as paid by regulation 24 (employee not paid weekly or monthly).

(3) But paragraph (4) applies if the extra payment is actually made before the date on which the main relevant payment in the payment period is due to be paid (disregarding the effects of regulation 24).

(4) A repayment which would (but for this paragraph) be due under regulation 23(6) on making the extra payment must not be paid to the employee, but must instead be added to the previous total tax (as defined by regulation 23(8)) on making the next relevant payment.

(5) This regulation does not apply if the extra payment is made in a short payment period (but regulation 31 applies instead if that period contains an extra pay day).

(6) “Payment period”—

(a)in the case of an employee normally paid weekly, means a tax week,

(b)in the case of an employee normally paid monthly, means a tax month,

(c)in the case of an employee normally paid at other regular intervals, has the meaning given in paragraph (7).

(7) In the case mentioned in paragraph (6)(c)—

(a)the first payment period in a tax year starts on 6th April and finishes at the end of the employee’s normal regular payment interval, and

(b)subsequent payment periods in the tax year start the day after the end of the previous payment period and finish—

(i)at the end of the employee’s normal regular payment interval, or

(ii)on 5th April (if earlier).

(8) “Short payment period” means the last payment period in a tax year if, because of paragraph (7)(b)(ii), it is shorter than the previous payment periods.

(9) “Extra pay day” has the meaning given in regulation 31(4).

The non-cumulative basisU.K.

The non-cumulative basisU.K.

26.—(1) An employer must deduct tax in accordance with regulation 27 (the non-cumulative basis) from any relevant payment made to an employee if—

(a)the Inland Revenue direct, or

(b)these Regulations provide,

that the non-cumulative basis is to apply.

(2) If this regulation applies then regulation 22 (cumulative basis) does not apply.

Non-cumulative basis: general rule for deductionsU.K.

27.—(1) On making a relevant payment, the employer must deduct the amount of tax which would have been deductible in accordance with the appropriate tax tables, by reference to the employee’s code, if the payment had been made on the first day of the tax year.

(2) This is subject to—

Non-cumulative basis: modification of general ruleU.K.

28.—(1) Paragraphs (2) to (5) modify the general rule in regulation 27(1) (the non-cumulative basis) in certain circumstances.

(2) If regulation 30 (employee not paid weekly or monthly) applies to the employee’s main relevant payments, the employer must deduct from a relevant payment the amount of tax which would have been deductible, by reference to the employee’s code, if the payment (whether or not it is a main relevant payment) had been made on the date given by that regulation.

(3) If the employer does not normally make relevant payments to the employee at regular intervals, the employer must deduct from a relevant payment the amount of tax which would have been deductible, by reference to the employee’s code—

(a)if the payment is the first payment in the tax year, on the date it is made, or

(b)in any other case, on the date found by counting forward x days starting on 5th April, where x is the number of days found by starting with the date of the previous relevant payment and counting forward to the date of the payment in question.

(4) But if two or more relevant payments are made in the same tax week, the employer must deduct from the second or subsequent relevant payment the amount of tax which (subject to regulation 29(5)) would have been deductible, by reference to the employee’s code, if that payment were made at the date given by paragraph (3) for the first payment.

(5) ... the deduction is not to exceed the overriding limit, subject to regulation 62(6) (notional payments).

Non-cumulative basis: aggregation of paymentsU.K.

29.—(1) Paragraph (2) applies if—

(a)relevant payments are normally made to an employee at regular intervals of a week or more, and

(b)the employee’s code is used on the non-cumulative basis.

(2) If the relevant payment is the second or subsequent relevant payment made to the employee during the payment period (as defined by regulation 25(6)), the amount of tax to be deducted must be—

(a)calculated by reference to the aggregate of the relevant payments made to the employee during the payment period (as defined by regulation 25(6)),

(b)increased by any tax not deducted because of the overriding limit when the previous relevant payment in that payment period was made to the employee, and

(c)reduced by the amount of tax calculated when the employer made the previous relevant payment in that payment period.

(3) But, for the purposes of the aggregate, any effects of regulation 30(2) (regular payments treated as made at later date) must be disregarded.

(4) Paragraph (5) applies if relevant payments to an employee—

(a)are normally made at regular intervals of less than a week, or

(b)are made at irregular intervals of less than a week.

(5) If the relevant payment is the second or subsequent relevant payment made to the employee during a tax week, the amount of tax to be deducted must be—

(a)calculated by reference to the aggregate of the relevant payments made to the employee in the tax week,

(b)increased by any tax not deducted because of the overriding limit when the previous relevant payment in that tax week was made to the employee, and

(c)reduced by the amount of tax calculated when the employer made the previous relevant payment in that tax week.

Non-cumulative basis: employee not paid weekly or monthlyU.K.

30.—(1) This regulation applies if—

(a)an employer normally makes main relevant payments to an employee at regular intervals which are longer than a week, other than monthly, and

(b)the employee’s code is used on the non-cumulative basis.

(2) Each main relevant payment in a tax year is treated for the purposes of calculating the deduction of tax as having been made at the end the period which—

(a)starts on 6th April, and

(b)finishes at the end of the employee’s regular payment interval.

(3) If the employee’s main relevant payments are normally made at regular intervals which are longer than a year, any such payment in a tax year is treated, for the purposes of calculating the deduction of tax, as made on 5th April in that tax year.

(4) But, in every case, the employer must record the actual date of every payment in the deductions working sheet.

Payments in short payment periodsU.K.

31.—(1) An employer must deduct tax on the non-cumulative basis from any relevant payment made to an employee in a short payment period which includes an extra pay day, even if the employee’s code is normally used on the cumulative basis.

(2) Paragraph (1) does not apply if the employee’s code is the basic rate code.

(3) If—

(a)the employee’s total payments to date do not exceed the employee’s total free pay to date, and

(b)the employee’s code is normally used on the cumulative basis,

the employer must not deduct any tax from relevant payments made in a short payment period which includes an extra pay day.

(4) “Extra pay day” means the last day in a tax year on which a main relevant payment is due to be made to an employee if—

(a)the employee’s main relevant payments are normally made weekly or at greater intervals which results in the number of pay days varying from tax year to tax year (solely because of the number of days in a calendar year), and

(b)the day falls in a short payment period.

(5) “Short payment period” has the meaning given in regulation 25(8).

[F69Higher rate, additional rate and nil tax codes]U.K.

Higher rate code: deductionsU.K.

32.  If an employee’s code is the higher rate code the employer must deduct tax at the higher rate, and regulations 22 and 26 (cumulative and non-cumulative basis) do not apply.

[F70Additional rate code: deductionsU.K.

32A.  If the employee’s code is the additional rate code the employer must deduct tax at the additional rate and regulations 22 and 26 (cumulative and non-cumulative basis) do not apply.]

[F71Scottish upper rate codesU.K.

32B.—(1) If the employee’s code is an appropriate Scottish upper rate code the employer must deduct tax at the Scottish upper rate specified in that code and regulations 22 and 26 (cumulative and non-cumulative basis) do not apply.

(2) For the purposes of this regulation an “appropriate Scottish upper rate code” has the meaning given in regulation 7(4).]

Nil tax code: no deductions or repaymentsU.K.

33.—(1) If an employee’s code is the nil tax code the employer must not deduct or repay any tax, and so regulation 22 (cumulative basis) does not apply.

(2) But—

(a)if the nil tax code is an amended code, and

(b)the Inland Revenue so direct,

regulation 22 applies to the next relevant payment the employer makes in the same tax year, and the employer must make any repayment of tax due.

Simplified deduction schemeU.K.

Simplified deduction scheme for personal employeesU.K.

34.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Simplified deduction schemes: recordsU.K.

35.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cessation of employmentU.K.

Cessation of employment: Form P45U.K.

36.—(1) On ceasing to employ an employee in respect of whom a code has been issued, the employer must complete Form P45.

[F72(1A) If Part 3 of Form P45 is not available—

(a)the employer is not required to complete that Part of the Form, and

(b)where the employer does not complete that Part, any requirement, however expressed, in these Regulations which relates only to Part 3 does not apply.]

(2) The employer must then—

(a)send Part 1 of that form to the Inland Revenue [F73if the employer is one to whom paragraph (2A) applies], and

(b)provide Parts 1A, 2 and 3 to the employee,

on the day on which the employment ceases or, if that is not practicable, without unreasonable delay.

[F74(2A) This paragraph applies to—

(a)non-Real Time Information employers, and

(b)Real Time Information employers to whom HMRC has given a notice requiring the employer to send to HMRC Form P45 or Form P46 on the commencement of a new employee’s employment.]

(3) Retirement on pension is not a cessation of employment for the purposes of this regulation if the PAYE pension income is paid by the same employer after retirement.

(4) The information listed in column 1 of Table 2 must, subject to the conditions set out in column 2, be provided in the various Parts of Form P45 as indicated in columns 3 to 5.

(5) This regulation is subject to regulations 38, 39 and 180 (death of employee etc).

[F76Income subject to retrospective tax provision — information to employeeU.K.

36A.—(1) This regulation applies if—

(a)a payment is made to an employee;

(b)the employment in connection with which it was paid ceases;

(c)the payment becomes a qualifying payment after the cessation of the employment;

(d)the tax year in which the payment was actually made is not closed, and

(e)the amount of the qualifying payment was not included in Form P45.

(2) If this regulation applies the person who made the payment must provide to the employee, without unreasonable delay after the relevant time, details of—

(a)the date on which the qualifying payment was actually made;

(b)the amount of the qualifying payment; and

(c)the amount of tax deducted under regulation 62(4) or (5).]

PAYE income paid after employment ceasedU.K.

37.—(1) This regulation applies if a relevant payment is made to an employee after the employment has ceased—

(a)by the former employer in respect of the former employment, or

(b)by any other person in respect of an obligation of the former employer,

and the payment has not been included in Form P45.

[F77(1A) But this regulation does not apply if regulation 37A applies.]

[F78(2) [F79The] person making the payment must deduct tax on the non-cumulative basis using the 0T Code.

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

(2B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(3) But—

(a)the payment does not affect the cessation of employment, and

(b)the provisions listed in paragraph (4) do not apply.

(4) The provisions are—

(5) The person making the payment must record the following information in a deductions working sheet (which the person must prepare for the purpose if one has not already been prepared for that tax year).

(6) The information is—

(a)the date of the payment,

(b)the amount of the relevant payment, and

(c)the amount of tax deducted on making the payment, or to be deducted or accounted for under regulation 62(4) or (5) (notional payments).

(7) The person making the payment must also notify the employee of the information mentioned in paragraph (6) without unreasonable delay.

[F82Income paid after cessation of employment subsequently becoming subject to PAYEU.K.

37A.—(1) This regulation applies if—

(a)a payment has been made, after the cessation of the employment, to a former employee—

(i)by the former employer, or

(ii)by any other person in respect of an obligation of the former employer;

(b)that payment becomes a qualifying payment after the employment ceased; and

(c)the amount of the qualifying payment has not been included in Form P45.

(2) Where a qualifying payment has been made in a closed year, the employer must deduct tax, from any other payment made to the former employee in the tax period at the relevant time—

(a)in accordance with the last code used for the tax year in which the qualifying payment was made, or

(b)if the employer has not been notified of a code for that tax year, at the [F83additional] rate of tax applicable for that year.

(3) Where a qualifying payment has been made in an open year, the employer must deduct tax from any other payment made to the former employee—

(a)in accordance with the code in force in the final tax period in which the employee was employed, or

(b)if the employer has not been notified of a code, at the [F84additional] rate of tax applicable for that year.

(4) Neither the making of the qualifying payment, nor its subsequently becoming taxable, affect the cessation of the employment, and the provisions listed in regulation 37(4) do not apply in relation that payment.

(5) The employer must record the following information in a deductions working sheet for the tax year in which that payment was made.

If a deductions working sheet has not already been prepared for that tax year, the employer must prepare one.

(6) The information is—

(a)the date on which the qualifying payment was actually made;

(b)the amount of that payment; and

(c)the amount of tax to be deducted or accounted for under regulation 62(4) or(5) (notional payments).

(7) The employer must also notify the employee of the information listed in paragraph (6) without unreasonable delay after the relevant time.]

Death of employeeU.K.

38.—[F85(A1) This regulation applies to—

(a)non-Real Time Information employers, and

(b)Real Time Information employers to whom HMRC has given a notice requiring the employer to send to HMRC Form P45 or Form P46 on the commencement of a new employee’s employment.]

(1) On the death of an employee (other than a pensioner) in respect of whom a code has been issued by the Inland Revenue, the employer must—

(a)complete Form P45 indicating in Part 1 that the employee has died, and

(b)send it to the Inland Revenue.

(2) The employer must comply with paragraph (1)—

(a)on the day on which the employer learns of the employee’s death, or

(b)if that is not practicable, without unreasonable delay.

(3) The employer must, on making a relevant payment after learning of the employee’s death but before completing Form P45, deduct or repay tax as if the deceased employee were still alive and employed by the employer at the date of the payment.

(4) Regulation 37(2) to (6) applies to any relevant payment which—

(a)is made in respect of the employee’s employment after the date of the employee’s death, and

(b)is not included in Form P45.

Death of pensionerU.K.

39.—[F86(A1) This regulation applies to—

(a)non-Real Time Information pension payers, and

(b)Real Time Information pension payers to whom HMRC has given a notice requiring the pension payer to send to HMRC Form P45 or Form P46(Pen) on the commencement of a new pensioner’s pension.]

(1) On the death of a pensioner in respect of whom a code has been issued by the Inland Revenue, the pension payer must—

(a)complete Form P45 indicating in Part 1 that the pensioner has died, and

(b)send it to the Inland Revenue.

(2) The pension payer must comply with paragraph (1)—

(a)on the day on which the pension payer learns of the pensioner’s death, or

(b)if that is not practicable, without unreasonable delay.

(3) Paragraph (4) applies if the pension payer makes any relevant pension payments after the date of the pensioner’s death—

(a)before completing Form P45, or

(b)after completing Form P45 but during the tax year in which the pensioner died.

(4) The pension payer must, on making any such payment, deduct or repay tax as if the deceased pensioner were still alive and in receipt of a pension at the date of the payment.

(5) Regulation 37(2) to (6) applies to any relevant pension payment which—

(a)is made in a tax year following the tax year in which the pensioner died, and

(b)is not included in Form P45.

Employee’s duty to provide Form P45U.K.

Duty of employee to give new employer Form P45U.K.

40.—(1) An employee who has Parts 2 and 3 of Form P45 must give them to the new employer on commencing a new employment.

(2) If an employee receives Parts 2 and 3 of Form P45 after commencing a new employment, the employee must immediately give them to the new employer.

(3) [F87But paragraphs (4) and (6) apply] if an employee objects to the disclosure of the total payments to date to the new employer.

(4) [F88If the employer is a non-Real Time Information employer or a Real Time Information employer to whom HMRC has given a notice requiring the employer to send to HMRC Form P45 or Form P46 on the commencement of a new employee’s employment, the] employee may, instead of complying with paragraph (1) or (2), send Parts 2 and 3 of Form P45 to the Inland Revenue before commencing the new employment or as soon as the employee receives Form P45 (as the case may be).

(5) The Inland Revenue—

(a)must then issue a code in respect of the employee to the new employer, and

(b)may direct that the non-cumulative basis is to apply to all relevant payments which the new employer makes to the employee.

[F89(6) If the employer is a Real Time Information employer, the employee need not comply with paragraphs (1) and (2).]

[F90Duty of employee to assist with completion of new employee fields in returns under regulations 67B and 67DU.K.

40A.—(1) An employee who commences employment with a Real Time Information employer must provide the information required to allow the employer to complete the new employee fields in the first return required by regulation 67B (real time returns of information about relevant payments) or 67D (exceptions to regulation 67B) which includes information in respect of the employee.

(2) The employer must verify the information given under paragraph (1) before making that return.

(3) In this regulation, “the new employee fields” means the information required under paragraphs 36 to 44 of Schedule A1.]

CHAPTER 2U.K.NEW EMPLOYEES (OTHER THAN PENSIONERS): FORMS P45 AND P46

Scope of Chapter 2U.K.

41.  This Chapter sets out the procedure to be followed for deductions and repayments (Form P45 and P46 procedure) in cases to which Chapter 3 (new pensioners: Forms P45 and P46) does not apply (see regulation 54).

Procedure if employer receives Form P45U.K.

42.—(1) This regulation applies—

(a)if an employee gives Parts 2 and 3 of Form P45 to the employer on commencing employment, and

(b)in the circumstances mentioned in regulation 51(2) (late presentation of Form P45: before employer required to send Form P46).

(2) The new employer must prepare a deductions working sheet and record on it the following information shown in Parts 2 and 3 of Form P45—

(a)the employee’s name,

(b)the employee’s national insurance number.

(3) If Parts 2 and 3 of Form P45 show that the earlier employment ended in the current tax year, the new employer must comply with regulation 43.

(4) If—

(a)Parts 2 and 3 of Form P45 show that the earlier employment ended in the previous tax year, and

(b)the new employment commences on or before 24th May,

the new employer must comply with regulation 44.

(5) If—

(a)Parts 2 and 3 of Form P45 show that the employment ended in the previous tax year, and

(b)the employment commences after 24th May,

the new employer must comply with regulation 45.

(6) If Parts 2 and 3 of Form P45 show that the employment ended in any earlier tax year, the new employer must comply with regulation 45.

[F91(6A) Paragraphs (7) and (8) apply if the employer is either—

(a)a non-Real Time Information employer, or

(b)a Real Time Information employer to whom HMRC has given a notice requiring the employer to send to HMRC Form P45 or Form P46 on the commencement of a new employee’s employment.]

(7) In all cases the new employer must then insert in Part 3 of Form P45—

(a)the employer’s employer reference,

(b)the date on which the new employment commenced,

(c)any number used to identify the employee,

(d)the employee’s code in use by the employer if different from the code shown in Parts 2 and 3 of Form P45,

(e)any figure recorded in accordance with paragraph (5)(c) or (6)(c) of regulation 43 (Form P45 for current tax year), if different from the total tax to date shown on Parts 2 and 3 of Form P45,

(f)the employee’s address,

(g)the employee’s date of birth, ...

[F92(ga)the employee’s sex,]

(h)the employee’s job title or description,

(i)the employer’s name, and

(j)the employer’s address.

(8) The employer must then send Part 3 of Form P45 to the employer’s Inland Revenue office.

Form P45 for current tax yearU.K.

43.—(1) The new employer must record in the deductions working sheet the code shown in Parts 2 and 3 of Form P45 as the employee’s code.

(2) Paragraphs (3) to (10) apply if Parts 2 and 3 of Form P45 show that the cumulative basis was used.

(3) The employer must record in the deductions working sheet the total payments to date (if any) shown in Parts 2 and 3 of Form P45.

(4) The employer must record in the deductions working sheet the following additional information, or keep such records as enable its production.

(5) If the code shown in Parts 2 and 3 of Form P45 is a K code, the additional information is—

(a)the total additional pay to date,

(b)the total taxable payments to date, and

(c)the lower of the total tax to date as at the week or month shown in Parts 2 and 3 of Form P45 and the total net tax deducted shown in it.

(6) In any other case, the additional information is—

(a)the total free pay to date,

(b)the total taxable payments to date, and

(c)the corresponding total tax to date as at the week or month shown in Parts 2 and 3 of Form P45.

(7) The amounts required by paragraphs (5)(a) and (b) and (6)(a) and (b) must be arrived at by the employer by reference to the information shown in Parts 2 and 3 of Form P45.

(8) On making any relevant payment to the employee, the employer must deduct or repay tax by reference to the employee’s code on the cumulative basis.

(9) For the purposes of—

(a)paragraph (8), and

(b)item 8 of Table 2 in regulation 36(4) (Form P45), and

(c)regulation 55(4)(f) [F93(Form P46(Pen))],

the total payments to date recorded in the deductions working sheet in accordance with paragraph (3), and the figure recorded in accordance with paragraph (5)(c) or (6)(c) must be treated as if they were relevant payments made to the employee by, and tax deducted by, the new employer.

(10) For the purposes of regulation 23(8) (cumulative basis: meaning of previous total tax to date) the figure recorded in accordance with paragraph (5)(c) or (6)(c) must be treated as the previous total tax to date when the employer next makes a relevant payment to the employee.

(11) If Parts 2 and 3 of Form P45 show that the non-cumulative basis has been used, on making any relevant payment to the employee the employer must, subject to regulation 32 (higher rate code: deductions), deduct or repay tax by reference to the employee’s code on the non-cumulative basis.

(12) The receipt by the employer of Parts 2 and 3 of Form P45 is treated as the issue by the Inland Revenue of the code shown in Parts 2 and 3 of Form P45 as the code for use in respect of the employee.

Form P45 for previous tax year: employment starting on or before 24th MayU.K.

44.—(1) The new employer must—

(a)record in the deductions working sheet the code shown in Parts 2 and 3 of Form P45 as the employee’s code, and

(b)deduct or repay tax by reference to that code on the cumulative basis, subject to regulation 32 (higher rate code: deductions).

(2) The receipt by the employer of Parts 2 and 3 of Form P45 is treated as the issue by the Inland Revenue of the code shown in Parts 2 and 3 of Form P45 as the code for use in respect of the employee.

Other Forms P45U.K.

45.—(1) The new employer must—

(a)record in the deductions working sheet the emergency code as the employee’s code, and

(b)deduct tax from each relevant payment using the emergency code on the non-cumulative basis.

(2) The emergency code is treated as having been issued to the employer by the Inland Revenue as the code for use in respect of the employee.

[F94Application of regulations 46 to 49E: Real Time Information employers and non-Real Time Information employersU.K.

45A.—(1) Regulations 46 to 49 (procedure where no Form P45) apply in relation to—

(a)non-Real Time Information employers, and

(b)Real Time Information employers to whom HMRC has given a notice requiring the employer to send to HMRC Form P45 or Form P46 on the commencement of a new employee’s employment.

(2) Regulations 49A to 49E (procedure where employee fails to assist with completion of new employee fields or no Form P45) apply in relation to Real Time Information employers other than those within paragraph (1)(b).]

Form P46 where employer does not receive Form P45 and code not knownU.K.

46.—(1) This regulation applies if—

(a)an employee commences employment without giving the employer Parts 2 and 3 of Form P45, and

(b)a code in respect of the employee has not otherwise been issued to the employer.

[F95(1A) The employee must provide the following information in Form P46.

(1B) The information is —

(a)the employee’s national insurance number (if known),

(b)the employee’s full name,

(c)the employee’s sex,

(d)the employee’s date of birth, and

(e)the employee’s full address including postcode.

[F96A seconded expatriate who is a national of an EEA state (see section 56(3)(za) of ITA) ... must provide confirmation of this as additional information.]]

(1C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) The employee must indicate in Form P46 which ... of the following statements [F97applies]—

• [F98Statement A: that the employment referred to in paragraph (1)(a) is the employee’s first employment since the preceding 6^th April, and the employee has not since that date received—

  (a)

  jobseeker’s allowance [F99, incapacity benefit or employment and support allowance] which is subject to income tax, or

  (b)

  a retirement pension or an occupational pension;

  Statement B: that the employee is not receiving a retirement pension or an occupational pension and since the preceding 6^th April—

  (a)

  has had another employment, but is not now in receipt of employment income from it, or

  (b)

  has received jobseeker’s allowance [F99, incapacity benefit or employment and support allowance] which is subject to income tax, but payment of that allowance or benefit has ceased;

  Statement C: that the employee either has another employment (which is continuing) or is in receipt of a retirement pension or an occupational pension.]

...

[F100A seconded expatriate must indicate instead which of the following statements applies—

Statement A: the employee intends to live in the United Kingdom for [F101183 days or more];

Statement B: the employee intends to live in the United Kingdom for less than [F102183 days];

Statement C: the employee will work both inside and outside the United Kingdom, but will live outside.]

[F103(2A) A Form P46 must be—

(a)signed by the employee; or

(b)delivered by the employer by an approved method of electronic communications after he has complied with paragraph (2B).

(2B) To the extent that the information contained in it relates to the employee, the employer must verify the content of a Form P46 before it is delivered.

(2C) If, despite the requirements of paragraphs (2) to (2B), a Form P46 is sent or delivered to an officer of Revenue and Customs without the requirements of those paragraphs being satisfied, the employer must deduct tax [F104on the non-cumulative basis using code 0T] from the employee’s earnings.]

[F105(3) The employer must provide the following information in the Form P46—

(a)the date on which the employment started;

(b)the employee’s works payroll number and the department or branch (if any) in which the employee is employed;

(c)the title of the job;

(d)the employer’s PAYE reference;

(e)the employer’s name;

(f)the employer’s full address, including the postcode; and

(g)the tax code used in relation to the employee’s earnings.]

(4) The employer must keep the Form P46 until required to send it to the Inland Revenue in accordance with regulations 47 to 49.

(5) Before sending the Form P46, the employer must indicate in the Form which code is being used in respect of the employee and whether it is being used on the non-cumulative basis.

(6) For the purposes of paragraph (1)(b), the employer must ignore any code issued to the employer in respect of an employee’s earlier employment which has ceased.

(7) This regulation ceases to apply in the circumstances mentioned in regulation [F10651(2)(a)] (late presentation of Form P45: before employer required to send Form P46).

[F107Procedure in Form P46 cases: (a) seconded expatriate is national of EEA state or Commonwealth citizen, or (b) employee is not seconded expatriate and Statement A applies]U.K.

47.—[F108(1) This regulation applies in the case of an employee [F109(not a seconded expatriate)] who indicates that Statement A applies.

[F109It also applies to a seconded expatriate who confirms being a national of an EEA state ... (see regulation 46(1B)).]]

(2) On making the first relevant payment which [F110equals or exceeds the lower earnings limit] to the employee, the employer must—

[F111(a)send the Form P46 to Her Majesty’s Revenue and Customs,]

(b)prepare a deductions working sheet and enter the total payments to date, and

(c)deduct tax on the cumulative basis using the emergency code.

[F112(2A) To comply with paragraph (2)(a)—

(a)the employer must send the Form P46 to Her Majesty’s Revenue and Customs even if the employee has not provided all of the information required by regulation 46, and

(b)the employer must provide any of the information required by regulation 46(1B) that the employee has not provided.]

(3) On making any subsequent relevant payment before the Inland Revenue issue a code for use in respect of the employee, the employer must continue to deduct or repay tax on the cumulative basis using the emergency code.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F113Procedure in Form P46 cases: (a) Statement B applies (not seconded expatriate), or (b) Statement B or C applies (seconded expatriate)]U.K.

48.—(1) This regulation applies in the case of an employee [F114(not a seconded expatriate)] who indicates in the Form P46 that ... Statement B applies.

[F114It also applies in the case of a seconded expatriate who indicates in the Form P46 that Statement B or C applies.]

(2) On making the first relevant payment which [F115equals or exceeds the lower earnings limit] to the employee, the employer must—

[F116(a)send the P46 to Her Majesty’s Revenue and Customs,]

(b)prepare a deductions working sheet and enter the total payments to date, and

(c)deduct tax on the non-cumulative basis using the emergency code.

[F117(2A) To comply with paragraph (2)(a)—

(a)the employer must send the Form P46 to Her Majesty’s Revenue and Customs even if the employee has not provided all of the information required by regulation 46, and

(b)the employer must provide any of the information required by regulation 46(1B) that the employee has not provided.]

(3) On making any subsequent relevant payment before the employee’s code is issued, the employer must continue to deduct or repay tax on the non-cumulative basis using the emergency code.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F118Procedure in Form P46 cases: (a) Statement C applies (not seconded expatriate), or (b) Statement A applies (seconded expatriate)...]U.K.

49.—(1) This regulation applies in any case which is not dealt with by regulation 47 or 48 which concerns an employee to whom regulation 46(1) applies.

(2) On making the first relevant payment to the employee, the employer must—

[F119(a)send the Form P46 to Her Majesty’s Revenue and Customs,]

(b)prepare a deductions working sheet and enter both the total payments to date and the total tax to date before the first payment as nil,

(c)deduct tax on the cumulative basis using the basic rate code.

[F120(2A) To comply with paragraph (2)(a)—

(a)the employer must send the Form P46 to Her Majesty’s Revenue and Customs even if the employee has not provided all of the information required by regulation 46, and

(b)the employer must provide any of the information required by regulation 46(1B) that the employee has not provided.]

(3) On making any subsequent relevant payment before the employee’s code is issued, the employer must continue to deduct tax on the cumulative basis using the basic rate code.

[F121(4) In the case of a seconded expatriate, the emergency code must be used instead of the basic rate code mentioned in paragraphs (2)(c) and (3) (see also regulation 7(3) about the codes).]

[F122Procedure where employee fails to assist with completion of new employee fields in returns under regulations 67B and 67DU.K.

49A.—(1) If, despite the requirements of regulation 40A(1) and (2) (duty of employee to assist with completion of new employee fields in returns under regulations 67B and 67D) and regulations 67B (real time returns of information about relevant payments) and 67D (exceptions to regulation 67B), a return is sent to HMRC under those regulations without the new employee fields being completed in respect of the employee, the employer must deduct tax on the non-cumulative basis using code 0T.

(2) In paragraph (1), “the new employee fields” has the same meaning as in regulation 40A.

Procedure where no Form P45 and code not known: application of regulations 49C to 49EU.K.

49B.—(1) Regulations 49C to 49E (procedure where no Form P45) apply if—

(a)regulation 49A does not apply,

(b)an employee commences employment without giving the employer Parts 2 and 3 of Form P45 and the circumstances mentioned in regulation 51(2)(b) (late presentation of Form P45) do not apply, and

(c)a code in respect of the employee has not otherwise been issued to the employer.

(2) For the purposes of paragraph (1)(c), the employer must ignore any code issued to the employer in respect of an employee’s earlier employment which has ceased.

Procedure where no Form P45 and: (a) employee is not a seconded expatriate and paragraph 41(a) of Schedule A1 applies; or (b) seconded expatriate is national of EEA stateU.K.

49C.—(1) This regulation applies where—

(a)the employee is not a seconded expatriate and has indicated in accordance with regulation 40A(1) (duty of employee to assist with completion of new employee fields in returns under regulations 67B and 67D) that the statement in paragraph 41(a) of Schedule A1 (real time returns) is correct, or

(b)the employee is a seconded expatriate and has confirmed in accordance with regulation 40A(1) being a national of an EEA state.

(2) On making the first relevant payment which equals or exceeds the lower earnings limit to the employee, the employer must—

(a)prepare a deductions working sheet and enter the total payments to date, and

(b)deduct tax on the cumulative basis using the emergency code.

(3) On making any subsequent relevant payment before HMRC issue a code for use in respect of the employee, the employer must continue to deduct or repay tax on the cumulative basis using the emergency code.

Procedure where no Form P45 and: (a) employee is not a seconded expatriate and paragraph 41(b) of Schedule A1 applies; or (b) employee is a seconded expatriate and paragraph 43(b) or 43(c) of Schedule A1 appliesU.K.

49D.—(1) This regulation applies where—

(a)the employee is not a seconded expatriate and has indicated in accordance with regulation 40A(1) that the statement in paragraph 41(b) of Schedule A1 is correct, or

(b)the employee is a seconded expatriate to whom regulation 49C does not apply and has indicated in accordance with regulation 40A(1) that the statement in paragraph 43(b) or 43(c) of Schedule A1 is correct.

(2) On making the first relevant payment which equals or exceeds the lower earnings limit to the employee, the employer must—

(a)prepare a deductions working sheet and enter the total payments to date, and

(b)deduct tax on the non-cumulative basis using the emergency code.

(3) On making any subsequent relevant payment before the employee’s code is issued, the employer must continue to deduct or repay tax on the non-cumulative basis using the emergency code.

Procedure where no Form P45 and: (a) employee is a not seconded expatriate and paragraph 41(c) of Schedule A1 applies; or (b) employee is a seconded expatriate and paragraph 43(a) of Schedule A1 appliesU.K.

49E.—(1) This regulation applies in any case which is not dealt with by regulation 49C or 49D.

(2) On making the first relevant payment to the employee, the employer must—

(a)prepare a deductions working sheet and enter both the total payments to date and the total tax to date before the first payment as nil,

(b)deduct tax on the cumulative basis using the basic rate code.

(3) On making any subsequent relevant payment before the employee’s code is issued, the employer must continue to deduct tax on the cumulative basis using the basic rate code.

(4) In the case of a seconded expatriate, the emergency code must be used instead of the basic rate code mentioned in paragraphs (2)(b) and (3).]

[F123No Form P45: code treated as issued by HMRC]U.K.

50.—(1) [F124Code 0T, the] emergency code or the basic rate code used by the employer in accordance with regulations [F12546] to [F12649E] is treated, for the purposes of Parts 2 to 4 (codes; deduction and repayment of tax; payments, returns and information) as having been issued by the Inland Revenue as the code for use in respect of the employee.

(2) This does not apply for the purposes of regulation 18 (objections and appeals) and regulations 46 to [F12649E] and 51 to 53 (... late presentation of Form P45).

[F127Procedure in cases of retrospective earnings: code treated as issued by HMRCU.K.

50A.—(1) If—

(a)as a result of a retrospective tax provision, a qualifying payment was made in a year (whether open or closed) to a person, and

(b)a code has never been issued to the employer in respect of employment with whom that qualifying payment was made,

paragraph (2) applies.

(2) Where this paragraph applies the higher rate code applicable to the year in which the qualifying payment was made is treated, for the purposes of Parts 2 to 4 (codes, deduction and repayment of tax, payments, information and returns) as having been issued by HMRC as the code for use in respect of the employee in relation to that year.

(3) Paragraph (2) does not apply for the purposes of regulation 18 (objections and appeals) and regulations 46 to [F12849E] and 51 to 53 (Form P46 procedure and late presentation of Form P45).]

Late presentation of Form P45U.K.

51.—(1) This regulation applies if an employee gives Parts 2 and 3 of Form P45 to the employer after commencing employment.

[F129(2) If the employee gives Parts 2 and 3 of Form P45 to the employer before, as the case may be—

(a)the employer is required to send Form P46 to HMRC under regulations 47 to 49, or

(b)the employer is required to send the first return in relation to the employee under regulation 67B (real time returns of information about relevant payments) or 67D (exceptions to regulation 67B) to HMRC,

regulation 42 (procedure if employer receives Form P45) applies.]

(3) If the employee gives Parts 2 and 3 of Form P45 to the employer—

[F130(a)after, as the case may be—

(i)Form P46 is required to have been sent to HMRC, or

(ii)the employer is required to send the first return in relation to the employee under regulation 67B or 67D to HMRC,

but]

(b)before the employee’s code has been issued to the employer,

this regulation and regulation 52 (late presentation of Form P45: employer’s duties) apply.

(4) If the employee gives Parts 2 and 3 of Form P45 to the employer after the employee’s code has been issued to the employer, they must be destroyed.

(5) If Parts 2 and 3 of Form P45 show that the employment ended in the current tax year then, unless the employer has already ceased to employ the employee—

(a)the code shown in Parts 2 and 3 of Form P45 is treated as having been issued by the Inland Revenue to the employer on the day the employee gives them to the employer, and

(b)the employer must comply with regulation 52.

(6) If Parts 2 and 3 of Form P45 show that the employment ended in the previous tax year and the employee gives them to the employer on or before 24th May then, unless the employer has already ceased to employ the employee—

(a)the code shown in Parts 2 and 3 of Form P45 is treated as having been issued by the Inland Revenue to the employer on the day the employee gives them to the employer,

(b)the employer must deduct or repay tax by reference to that code using the cumulative basis, subject to regulation 32 (higher rate code: deductions), and

(c)the employer must comply with paragraphs (2) and (3) of regulation 52.

(7) Parts 2 and 3 of Form P45 must be destroyed—

(a)if they show that the employment ended in the previous tax year and the employee gives them to the employer after 24th May, or

(b)if they show that the employment ended in an earlier tax year.

Late presentation of Form P45: employer’s dutiesU.K.

52.—(1) This regulation applies in the circumstances mentioned in regulation 51(5); and paragraphs (2) and (3) of this regulation also apply in the circumstances mentioned in regulation 51(6).

[F131(1A) Paragraphs (2) and (3) apply if the employer is either—

(a)a non-Real Time Information employer, or

(b)a Real Time Information employer to whom HMRC has given a notice requiring the employer to send to HMRC Form P45 or Form P46 on the commencement of a new employee’s employment.]

(2) The employer must insert in Part 3 of Form P45—

(a)the employer’s employer reference,

(b)the date on which the new employment commenced,

(c)any number used to identify the employee,

(d)the employee’s code in use by the employer if different from the code shown in Parts 2 and 3 of Form P45,

(e)if Parts 2 and 3 of the Form P45 show that the cumulative basis has been used, the figure (if any) recorded in accordance with paragraph (7)(c) or (8)(c) if different from the total tax to date shown on Parts 2 and 3 of Form P45,

(f)the employee’s address,

(g)the employee’s date of birth, ...

[F132(ga)the employee’s sex,]

(h)the employee’s job title or description,

(i)the employer’s name, and

(j)the employer’s address.

(3) The employer must then send Part 3 of Form P45 to the employer’s Inland Revenue office.

(4) The employer must prepare a deductions working sheet (unless the employer has already prepared one) in accordance with the following information shown in Parts 2 and 3 of Form P45—

(a)the employee’s name,

(b)the employee’s national insurance number, and

(c)the employee’s code.

(5) The employer must record in the deductions working sheet the sum of—

(a)the total payments to date (if any) shown in Parts 2 and 3 of Form P45, and

(b)the relevant payments which have been made by the employer since the employment commenced which have not already been recorded in the deductions working sheet.

(6) If Parts 2 and 3 of Form P45 show that the cumulative basis has been used, the employer must also record the following additional information in the deductions working sheet, or keep such records as enable its production.

(7) If the code shown in Parts 2 and 3 of Form P45 is a K code, the additional information is—

(a)the total additional pay to date,

(b)the total taxable payments to date, and

(c)the lower of the total tax to date as at the week or month shown in Parts 2 and 3 of Form P45 or the total net tax deducted shown in it.

(8) In any other case, the additional information is—

(a)the total free pay to date,

(b)the total taxable payments to date, and

(c)the corresponding total tax to date as at the week or month shown in Parts 2 and 3 of Form P45.

(9) The employer must ascertain the amounts required by paragraphs (7)(a) and (b) and (8)(a) and (b) by reference solely to the information shown in Parts 2 and 3 of Form P45.

(10) If Parts 2 and 3 of Form P45 show that the cumulative basis has been used, the employer, on making any subsequent relevant payment to the employee, must deduct or repay tax by reference to the code shown in Parts 2 and 3 of Form P45 on the cumulative basis.

(11) For the purposes of—

(a)paragraph (10), and

(b)item 8 of Table 2 in regulation 36(4) (Form P45), and

(c)regulation 55(4)(f) [F133(Form P46(Pen))],

the total payments to date recorded in the deductions working sheet in accordance with paragraph (5) and the figure recorded in accordance with paragraph (7)(c) or (8)(c) must be treated as if they were relevant payments made to the employee by, and tax deducted by, the new employer.

(12) For the purposes of regulation 23(8) (cumulative basis: meaning of previous total tax to date), the figure recorded in accordance with paragraph (7)(c) or (8)(c) must be added to any actual previous total tax to date, and the total treated as the previous total tax to date when the employer next makes a relevant payment to the employee.

(13) If Parts 2 and 3 of Form P45 show that the non-cumulative basis has been used, on making any relevant payment to the employee, the employer must, subject to regulation 32 (higher rate code: deductions), deduct tax by reference to the code shown in Parts 2 and 3 of Form P45 on the non-cumulative basis.

[F134No Form P45: subsequent procedure on issue of employee’s code]U.K.

53.—(1) On making any relevant payment to an employee falling within regulation 47 to [F13549E (procedure where no Form P45)] after the Inland Revenue have issued a code to the employer for use in respect of the employee, the employer must deduct or repay tax by reference to that code.

(2) For the purposes of paragraph (1) and regulation 66 (deductions working sheets)—

(a)any total payments to date notified to the employer by the Inland Revenue are treated as if they represented relevant payments made by the employer; and

(b)the total net tax deducted before the first payment made in accordance with this regulation is taken to be the sum of—

(i)the total net tax deducted, if any, notified to the employer by the Inland Revenue, and

(ii)any tax which the employer was liable to deduct from the employee’s relevant payments under regulation 47, 48 [F136, 49, 49C, 49D or 49E].

(3) For the purposes of—

(a)item 8 of Table 2 in regulation 36(4) (Form P45), and

(b)regulation 55(4)(f) [F137(Form P46(Pen))],

any total payments to date and total net tax deducted which are notified to the employer by the Inland Revenue must be treated as if they were relevant payments made to the employee by, and tax deducted by, the employer.

(4) If the employee’s previous code was used on the cumulative basis, any amount notified to the employer under paragraph (2)(b)(i) must be added to the previous total tax to date for the purposes of regulation 23(8) (cumulative basis: meaning of previous total tax to date).

CHAPTER 3U.K.[F138NEW PENSIONERS: FORMS P45 AND P46(PEN)]

Scope of Chapter 3U.K.

[F13954.  This Chapter applies (instead of Chapter 2) when a pension starts and either—

(a)the pensioner will be continuing in employment and will be receiving relevant pension payments in addition to relevant payments from their employer, or

(b)the pensioner will not be receiving relevant payments other than relevant pension payments.]

[F140Application of this Chapter to Real Time Information pension payersU.K.

54ZA.—(1) Any requirement in this Chapter to complete (howsoever expressed) and send to HMRC Part 3 of Form P45 or Form P46(Pen) applies only to—

(a)non-Real Time Information pension payers, and

(b)Real Time Information pension payers to whom HMRC has given a notice requiring the pension payer to send to HMRC Form P45 or Form P46(Pen) on the commencement of a new pensioner’s pension.

(2) Paragraph (1) is without prejudice to the requirement in regulation 55(3)(b) (PAYE pension income paid by former employer) to complete and give Form P46(Pen) to the pensioner.]

[F141Relevant pension payments and relevant payments being received by a pensionerU.K.

54A.—(1) This regulation applies if the pensioner begins to receive relevant pension payments whilst continuing to receive relevant payments from their employer.

(2) On making relevant pension payments to the pensioner, the pension payer must deduct tax on the non-cumulative basis using the 0T tax code.

(3) The pension payer must send to HMRC the following information in the Form P46(Pen)—

(a)the pensioner’s national insurance number, if known,

(b)the pensioner’s full name,

(c)the pensioner’s sex,

(d)the pensioner’s date of birth,

(e)the pensioner’s full address including postcode,

(f)the date upon which the pension payments started,

(g)the pensioner’s work payroll number and the department or branch (if any) in which the pensioner is employed,

(h)confirmation that the recipient of the relevant payments is a pensioner,

(i)the pension payer’s PAYE reference,

(j)the pension payer’s name,

(k)the pension payer’s full address including postcode, and

(l)the tax code used in relation to the pension.

(4) Before sending the Form P46(Pen), the pension payer must indicate in the form that code 0T is being used on a non-cumulative basis in respect of the pension.

[F142Procedure in regulation 54A cases: code treated as issued by HMRC]U.K.

54B.—(1) The 0T code used by the pension payer in accordance with regulation 54A is treated, for the purposes of Parts 2 to 4 (codes; deduction and repayment of tax; payments, returns and information), as having been issued by HMRC as the code for use in respect of the pensioner.

(2) This does not apply for the purposes of regulation 18 (objections and appeals) and regulations 58, 60 and 61 ... late presentation of Form P45 etc).]

PAYE pension income paid by former employerU.K.

55.—(1) This regulation applies if the pension payer was, immediately before the pensioner’s retirement, the pensioner’s employer and so, in accordance with regulation 36(3), no Form P45 was completed.

(2) On making relevant pension payments to the pensioner, the pension payer must deduct tax on the non-cumulative basis, subject to regulation 32 (higher rate code: deductions), for the remainder of the tax year in which the pension starts or until directed otherwise by the Inland Revenue.

(3) Within 14 days after the pensioner’s retirement, the pension payer must prepare a [F143Form P46(Pen)] and—

(a)send it to the Inland Revenue, and

(b)give [F144a copy of the information] to the pensioner.

(4) The [F143Form P46(Pen)] must contain the following information—

(a)the pensioner’s name,

(b)the pensioner’s address, ...

[F145(ba)the pensioner’s date of birth,

(bb)the pensioner’s sex,]

(c)the pensioner’s national insurance number, if known,

(d)the pension payer’s PAYE reference,

(e)the date of retirement,

(f)the total payments to date at the date of retirement,

(g)the total payments to date relating to the employment in question at the date of retirement,

(h)the total net tax deducted corresponding to the total payments to date relating to the employment in question,

(i)the amount of pension payable [F146annually],

(j)any number used to identify the pensioner,

(k)whether the pensioner’s code is use on the cumulative basis,

(l)the pension payer’s name, and

(m)the pension payer’s address.

(5) Paragraph (4) is subject to regulation 212 (modifications for electronic version of [F143Form P46(Pen)] ...).

PAYE pension income paid by other pension payerU.K.

56.—(1) This regulation applies if the pensioner gives Parts 2 and 3 of Form P45 to the pension payer when a pension starts.

(2) The pension payer must insert in Part 3 of Form P45—

(a)the pensioner’s address,

(b)any number used to identify the pensioner, ...

(c)the date on which the pension started.

[F147(d)the pensioner’s date of birth, and

(e)the pensioner’s sex.]

(3) The pension payer must then send Part 3 of Form P45 to the pension payer’s Inland Revenue office.

(4) The receipt by the pension payer of Parts 2 and 3 of Form P45 under paragraph (1) is treated as the issue by the Inland Revenue of the code shown in Parts 2 and 3 of Form P45 as the code for use in respect of the pensioner.

(5) On making relevant pension payments to the pensioner, the pension payer must, subject to regulation 32 (higher rate code: deductions), deduct or repay tax—

(a)on the non-cumulative basis, for the remainder of the tax year to which Parts 2 and 3 of Form P45 relate;

(b)on the cumulative basis, for subsequent tax years.

(6) Paragraph (5) applies until the pension payer is directed otherwise by the Inland Revenue.

[F148Information to be provided in Form P46(Pen) if code not known: non UK residents]U.K.

57.—(1) This regulation applies if a pension payer pays a pension, which does not arise wholly from an employment carried on abroad, to a pensioner—

(a)who is not resident in the United Kingdom,

(b)who has not given Parts 2 and 3 of Form P45 to the pension payer, and

(c)in respect of whom a code has not otherwise been issued by the Inland Revenue.

(2) On making the first payment which exceeds the PAYE threshold, the pension payer must send to the Inland Revenue the following information in [F149Form P46(Pen)].

[F150(3) The information is—

(a)the pensioner’s national insurance number (if known),

(b)the pensioner’s full name,

(c)the pensioner’s sex,

(d)the pensioner’s date of birth,

(e)the pensioner’s full address including postcode,

(f)date upon which payment of the pension started,

(g)the pensioner’s works payroll number and the department or branch (if any),

(h)the fact that the recipient is a pensioner,

(i)the pension payer’s PAYE reference,

(j)the pension payer’s name,

(k)the pension payer’s full address, including the postcode.]

(4) For the purposes of paragraph (1)(c), the pension payer must ignore any code issued to the pension payer in respect of a previous pension of the pensioner which has ended.

[F151Procedure if no Form P45 and code not known: UK pensioners]U.K.

58.—(1) This regulation applies if—

(a)a pension payer starts to make relevant pension payments to a pensioner,

(b)the pensioner is resident in the United Kingdom,

(c)the pensioner does not give to the pension payer Parts 2 and 3 of Form P45, and

(d)a code in respect of the pensioner has not otherwise been issued to the pension payer.

[F152(1A) This regulation does not apply where the relevant pension payment is a relevant lump sum payment.]

(2) On making any relevant pension payments to the pensioner before the Inland Revenue issue a code for use in respect of the pensioner, the pension payer must deduct tax on the non-cumulative basis applying the emergency code.

(3) The pension payer must send the Inland Revenue the following information in [F153Form P46(Pen)].

[F154(4) The information is—

(a)the pensioner’s national insurance number (if known),

(b)the pensioner’s full name,

(c)the pensioner’s sex,

(d)the pensioner’s date of birth,

(e)the pensioner’s full address including postcode,

(f)date upon which payment of the pension started,

(g)the pensioner’s works payroll number and the department or branch (if any),

(h)the fact that the recipient is a pensioner,

(i)the pension payer’s PAYE reference,

(j)the pension payer’s name,

(k)the pension payer’s full address, including the postcode, and

(l)the tax code used in relation to the pension.]

(5) The pension payer must also indicate in the Form that the emergency code is being used on the non-cumulative basis.

(6) For the purposes of paragraph (1)(d), the pension payer must ignore any code issued to the pension payer in respect of a previous pension of the pensioner which has ended.

[F155(7) In this regulation, and in regulation 58A (procedure if no Form P45 and code not known where payment is a relevant lump sum payment), a “relevant lump sum payment” is—

(a)a payment of taxable pension income under section 636B or 636C of ITEPA, or treated as such a payment, and

(b)which is made at a time when the pension payer is not making any other payments of PAYE pension income to the pensioner under the same registered pension scheme.]

[F156Procedure if no Form P45 and code not known where payment is a relevant lump sum paymentU.K.

58A.—(1) This regulation applies if—

(a)a pension payer makes a payment of a relevant lump sum payment,

(b)the pensioner is resident in the United Kingdom,

(c)the pensioner does not give to the pension payer Parts 2 and 3 of Form P45, and

(d)a code in respect of the pensioner has not otherwise been issued to the pension payer.

(2) On making a relevant lump sum payment to the pensioner before HMRC issue a code for use in respect of the pensioner, the pension payer must deduct tax using the basic rate code on the non-cumulative basis.

(3) Where the pension payer is one to whom paragraph (6) applies on the day on which the relevant lump sum payment is made, or if that is not practicable, without unreasonable delay, the pension payer must complete Form P45 and provide—

(a)Part 1 of Form P45 to HMRC, and

(b)Parts 1A, 2 and 3 to the pensioner.

(4) Where paragraph (6) does not apply, on the day on which the relevant lump sum payment is made, or if that is not practicable, without unreasonable delay, the pension payer must complete and provide Parts 1A, 2 and 3 of Form P45 to the pensioner.

(5) The information listed in rows 1 to 6, and 10 to 16 of column 1 of Table 2 to regulation 36 must, subject to the conditions set out in column 2, be provided in the various Parts of Form P45 as indicated in columns 3 to 5, as if—

(a)references to “employer” were to “pension payer”, and

(b)references to “employee” were to “pensioner.

(6) This paragraph applies to—

(a)a pension payer who is a non-Real Time Information pension payer, and

(b)a Real Time Information pension payer to whom HMRC has given a notice requiring the pension payer to send to HMRC Form P45.]

UK resident pensioner’s code treated as issued by Inland RevenueU.K.

59.—(1) The emergency code used by the pension payer in accordance with regulation 58 is treated, for the purposes of Parts 2 to 4 (codes; deduction and repayment of tax; payments, returns and information) as having been issued by the Inland Revenue as the code for use in respect of the pensioner.

(2) This does not apply for the purposes of regulation 18 (objections and appeals) and regulations 58, 60 and 61 (... late presentation of Form P45 etc).

Late presentation of Form P45U.K.

60.—(1) Paragraphs (2) to (6) apply if the pensioner gives Parts 2 and 3 of Form P45 to the pension payer after the pension has started but before a code has been issued.

(2) The pension payer must insert in Part 3 of Form P45—

(a)the pensioner’s address,

(b)any number used to identify the pensioner, and

(c)the date on which the pension started.

(3) The pension payer must then send Part 3 of Form P45 to the pension payer’s Inland Revenue office.

(4) The receipt by the pension payer of Parts 2 and 3 of Form P45 under paragraph (1) is treated, except for the purposes of paragraph (1), as the issue by the Inland Revenue of the code shown in that Form as the pensioner’s code.

(5) On making relevant pension payments to the pensioner, the pension payer must, subject to regulation 32 (higher rate code: deductions), deduct or repay tax—

(a)on the non-cumulative basis, for the remainder of the tax year to which Parts 2 and 3 of Form P45 relate;

(b)on the cumulative basis, for subsequent tax years.

(6) Paragraph (5) applies until the pension payer is directed otherwise by the Inland Revenue.

(7) If Parts 2 and 3 of Form P45 are given to the pension payer after the pension has started and after a code has been issued by the Inland Revenue, they must be destroyed.

Subsequent procedure on issue of UK resident pensioner’s codeU.K.

61.—(1) On making any relevant pension payment to a pensioner falling within regulation 58 after the Inland Revenue have issued a code to the pension payer for use in respect of the pensioner, the pension payer must deduct or repay tax by reference to that code.

(2) For the purposes of paragraph (1) and regulation 66 (deductions working sheets)—

(a)any total payments to date notified to the pension payer by the Inland Revenue are treated as if they represented relevant pension payments made by pension payer; and

(b)the total net tax deducted before the first payment made in accordance with this regulation is taken to be the sum of—

(i)the total net tax deducted, if any, notified to the pension payer by the Inland Revenue, and

(ii)any tax which the pension payer was liable to deduct from the pensioner’s relevant pension payments under regulation 58.

(3) For the purposes of—

(a)item 8 of Table 2 in regulation 36(4) (Form P45), and

(b)regulation 55(4)(f) [F157(P46(Pen))],

any total payments to date and total net tax deducted which are which are notified to the employer by the Inland Revenue must be treated as if they were relevant pension payments made to the pensioner by, and tax deducted by, the pension payer.

(4) If the pensioner’s previous code was used on the cumulative basis, any amount notified to the pension payer under paragraph (2)(b)(i) must be added to the previous total tax to date for the purposes of regulation 23(8) (meaning of previous total tax to date).

[F158CHAPTER 3AU.K.BENEFITS IN KIND

InterpretationU.K.

61A.  In this Chapter—

[F159“amount foregone” has the meaning given in section 69B of ITEPA;]

“authorised employer” has the meaning given by regulation 61C;

“main relevant payment” means the relevant payment normally made to the specified employee at regular intervals of a week or more;

“making good payment” means the payment referred to in regulation 61E(2) or 61G(2)(b);

[F160“optional remuneration arrangements” has the meaning given in section 69A of ITEPA;”

“relevant amount” means the amount calculated in accordance with section 87A, 94A, 120A, 154A or 203A of ITEPA, as the case may be;]

[F161“specified benefit” means any benefit treated as earnings under any of the following provisions of Part 3 of ITEPA (employment income: earnings and benefits etc. treated as earnings)—

“specified employee” means an employee to whom an authorised employer provides a specified benefit;

“Taxable Amount of the Benefit” has the meaning given in regulation 61D(1).

PAYE: benefits in kindU.K.

61B.—(1) This Chapter applies where during a tax year an authorised employer provides a specified benefit to a specified employee.

(2) Where this Chapter applies—

(a)the specified benefit is to be treated as a payment of PAYE income for the purposes of these Regulations; and

(b)any reference (howsoever expressed) in these Regulations to relevant payment includes an amount in respect of the provision of a specified benefit, such amount to be determined in accordance with regulations 61D, 61H, 61I, 61J, [F16961K, 61L and 61LA], as the case may be;

but this is subject to paragraph (3).

(3) An amount determined in accordance with regulation 61D, 61H, 61I, 61J, [F17061K, 61L or 61LA], as the case may be, is not to be included as a relevant payment for the purpose of calculating whether the deduction of tax would exceed the overriding limit.

Authorised employerU.K.

61C.—(1) An employer is an authorised employer in respect of a specified employee for a tax year for the purposes of this Chapter if—

(a)HMRC has authorised that employer to make—

(i)deductions of income tax in respect of the provision of a specified benefit from payments which that employer actually makes of, or on account of, PAYE income of that employee; or

(ii)repayments of such income tax; and

(b)such authorisation has not been withdrawn.

(2) An employer will be authorised by HMRC if the conditions set out in paragraph (3) are met.

(3) The conditions are that—

(a)before the start of the tax year the employer has made an application for authorisation in respect of one or more specified employees to HMRC; and

(b)such an application identifies the specified benefit or benefits that will be provided to the specified employees.

(4) But in cases falling within paragraph (5), an employer may make an application for authorisation in respect of one or more specified employees during a tax year.

(5) The cases are that—

(a)a specified benefit or benefits is to be provided to the specified employees referred to in the application for the first time during the tax year;

(b)a specified benefit or benefits is to be provided to an employee upon commencement of employment and the employer is already an authorised employer for the purposes of this Chapter; or

(c)the application made before the start of the tax year contained an error.

(6) If during the tax year an authorised employer notifies HMRC that the application for authorisation is withdrawn in respect of the specified employees identified in the notification, then the employer will cease to be an authorised employer in respect of those specified employees from the end of the tax year in which that notice is given.

(7) But in cases falling within paragraph (8), where an authorised employer notifies HMRC the application for authorisation is withdrawn in respect of the specified employees identified in the notification, then the employer will cease to be an authorised employer in respect of those employees from the date that the notification is received by HMRC.

(8) The cases are—

(a)the relevant payment actually made to the specified employee named in the withdrawal notification will be insufficient to enable the authorised employer to deduct the full amount of tax due in respect of the relevant payment;

(b)that during the tax year the authorised employer stops providing a specified benefit or benefits to the specified employees identified in the withdrawal notification and the Revised Taxable Amount of the Benefit provided is nil; or

(c)the application made before the start of the year contained an error.

(9) Any application or notice must be made to HMRC using an approved method of electronic communication unless the employer is one to whom regulation 67D applies.

(10) For the purposes of this regulation, “Revised Taxable Amount of the Benefit” means the result of the calculation at step 3 of regulation 61I(2), as applied by regulation 61J(2).

Deduction and repayments of tax: general ruleU.K.

61D.—(1) Where this Chapter applies an authorised employer must take the following steps—

Step 1

Before making the first main relevant payment to a specified employee in a tax year, the cash equivalent [F171, the relevant amount or amount foregone in respect] of the specified benefit or benefits to be provided in that tax year must be determined in accordance with regulation 61E, 61F or 61G (methods of calculating the cash equivalent [F172, the relevant amount or amount foregone in respect] of specified benefits), as the case may be.

Step 2

Determine the number of main relevant payments to be made to the specified employee in that tax year.

Step 3

Divide the amount obtained from step 1 by the number obtained from step 2.

The resulting amount is the Taxable Amount of the Benefit.

Step 4

Add the Taxable Amount of the Benefit to the first main relevant payment.

Step 5

Deduct or repay tax on the amount obtained at step 4 in accordance with these Regulations by reference to the employee’s code if the employer has one for the employee, even if the code is the subject of an objection or appeal.

(2) On making any subsequent main relevant payment in the tax year the authorised employer must add the Taxable Amount of the Benefit to that payment and apply step 5 of paragraph (1) to that amount.

(3) This regulation is subject to regulations 61H, 61I, 61J, [F17361K, 61L and 61LA](modifications to the general rule).

Method of calculating the cash equivalent [F174or relevant amount in respect] of the benefit of a car or vanU.K.

61E.—(1) Where the specified benefit is the provision of a car or a van the cash equivalent [F175or relevant amount is calculated in accordance with section 121, 121A, 154A or 155 of ITEPA], as the case may be.

(2) For the purposes of paragraph (1), the authorised employer may take into account payments that the specified employee is required to make in the tax year as a condition of the car or van being available for that employee’s private use.

Method of calculating the cash equivalent [F176or amount foregone in respect] of the benefit of fuelU.K.

61F.—(1) Where the specified benefit is the provisions of car fuel or van fuel the cash equivalent [F177or amount foregone in respect of that benefit is calculated in accordance with section 149A, 150, 160A or 161 of ITEPA], as the case may be.

(2) For the purposes of paragraph (1), the authorised employer may take into account payments that the specified employee is required to make during the tax year in connection with the provision of fuel for that employee’s private use.

Method of calculating the cash equivalent [F178or relevant amount] of [F179non-cash vouchers, credit-tokens and] employment-related benefitsU.K.

61G.—(1) Where the specified benefit is [F180a non-cash voucher, credit-token or] any employment-related benefit the [F181cash equivalent or relevant amount of the specified benefit is to be calculated in accordance with section 87, 87A, 94, 94A, 203 or 203A of ITEPA, as the case may be.]

(2) For the purposes of paragraph (1), the authorised employer may make reasonable assumptions about—

(a)the cost of a specified benefit to be incurred in a tax year where the cost is not known at the start of the tax year; and

(b)payments that a specified employee is expected to make in the tax year to make good any part of the cost incurred in providing the benefit to that employee.

Modification of the general rule: cessation of employment but continuing benefitU.K.

61H.—(1) This regulation applies instead of regulation 61D(2) if during a tax year the employment of a specified employee ceases but the authorised employer continues to provide the specified benefit to that employee.

(2) Before the employment ceases the authorised employer must take the following steps—

Step 1

Determine at that time the number of remaining main relevant payments to be made in the employment.

Step 2

If the cost to the authorised employer of the specified benefit has changed, redetermine the cash equivalent [F182, relevant amount or amount foregone] in accordance with regulations 61E, 61F or 61G, as the case may be, otherwise the cash equivalent [F183, relevant amount or amount foregone in respect] of the specified benefit is that previously determined for the tax year under step 1 of regulation 61D(1).

The result is the revised cash equivalent [F183, relevant amount or amount foregone in respect] of the specified benefit provided during the employment.

Step 3

Calculate the taxable amount of the benefit provided to date by—

(a)determining the number of main relevant payments that have been made to date, then

(b)multiplying that number by the Taxable Amount of the Benefit obtained under step 3 of regulation 61D(1).

Step 4

Subtract the taxable amount of the benefit provided to date (the amount obtained from step 3) from the revised cash equivalent [F183, relevant amount or amount foregone in respect] of the benefit provided during the employment (the amount obtained from step 2).

Step 5

Divide the amount obtained from step 4 by the number obtained at step 1.

The result is the Adjusted Taxable Amount of the Benefit.

Step 6

Add the Adjusted Taxable Amount of the Benefit to either—

(a)the next main relevant payment, where that is the only main relevant payment remaining in the employment; or

(b)each of the remaining main relevant payments, where the number of remaining main relevant payment determined under step 1 of paragraph (2) is more than one,

and apply step 5 of regulation 61D(1) to that amount or amounts, as the case may be.

Modification of the general rule: in-year adjustments: change to the benefit during the year with effect from the date of the changeU.K.

61I.—(1) This regulation applies instead of regulation 61D(2) if during a tax year there is a change to the specified benefit provided to a specified employee and, for the purposes of calculating the cash equivalent [F184, relevant amount or amount foregone in respect] of that benefit under ITEPA, that change has effect from the date the revised benefit is provided to the employee.

(2) Subject to paragraph (4), the authorised employer must take the following steps—

Step 1

Before making the next main relevant payment after the change to the specified benefit has taken effect, calculate the revised cash equivalent [F185, relevant amount or amount foregone in respect] of the specified benefit by—

(a)determining the [F186cash equivalent, relevant amount or amount foregone in respect of the specified benefit that has been provided in the tax year, in accordance with section 87, 87A, 94, 94A, 121, 121A, 149A, 150, 154A, 155, 160A, 161, 203 or 203A of ITEPA], as the case may be, then

(b)determining the cash equivalent [F187, relevant amount or amount foregone in respect] of the specified benefit, that will be provided for the remainder of the tax year, in accordance with regulation 61E, 61F or 61G, as the case may be, and

(c)adding these numbers together.

Step 2

Calculate the taxable amount of the benefit provided to date by—

(a)determining the number of main relevant payments that have been made to date, then

(b)multiplying that number by the Taxable Amount of the Benefit determined under step 3 of regulation 61D(1).

Step 3

Subtract the taxable amount of the benefit provided to date (the amount obtained from step 2) from the revised cash equivalent [F188, relevant amount or amount foregone in respect] of the specified benefit (the amount obtained from step 1).

Step 4

Determine the number of remaining main relevant payments to be made in the tax year.

Step 5

Divide the amount obtained from step 3 by the number obtained at step 4.

The result, where the amount is a positive value, is the Increased Taxable Amount of the Benefit.

The result, where the amount is a negative value, is the Reduced Taxable Amount of the Benefit.

Step 6

Add the Increased Taxable Amount of the Benefit to, or subtract the Reduced Taxable Amount of the Benefit from, the next main relevant payment and apply step 5 of regulation 61D(1) to that amount.

(3) On making any subsequent main relevant payment in that year, the employer must add the Increased Taxable Amount of the Benefit to, or subtract the Reduced Taxable Amount of the Benefit from, that payment and apply step 5 of regulation 61D(1) to that amount.

(4) Where the change to the specified benefit occurs in the final tax month of a tax year and the authorised employer is not able to take the steps set out in paragraph (2) before the final main relevant payment for that year is made that employer must—

(a)comply with steps 1 to 5 of paragraph (2) before the first main relevant payment of the next tax year (“tax year 2”) is made;

(b)add the Increased Taxable Amount of the Benefit to, or subtract the Reduced Taxable Amount of the Benefit from, the first main relevant payment to be made in tax year 2; and

(c)apply step 5 of regulation 61D(1) to that amount.

Modification of the general rule: in-year adjustments: change to the benefit during the year with effect from the start of tax year and other changesU.K.

61J.—(1) This regulation applies if during a tax year:

(a)there is a change to the specified benefit provided to a specified employee and, for the purposes of calculating the cash equivalent [F189, relevant amount or amount foregone in respect] of that benefit under ITEPA, that change has effect from the start of the tax year;

(b)the employer becomes aware that the cash equivalent [F189, relevant amount or amount foregone in respect] of the specified benefit determined at the start of the year in accordance with regulation 61E, 61F or 61G (method of calculating the cash equivalent) is no longer accurate;

(c)the employer will stop providing a specified benefit during the tax year; or

(d)there is a change to the number of main relevant payments used to determine the Taxable Amount of the Benefit where the specified employee is paid at irregular intervals.

(2) Where this regulation applies, regulation 61D(2) no longer applies and regulation 61I applies but with the modification in paragraph (3).

(3) For the purposes of calculating the revised cash equivalent [F190, relevant amount or amount foregone] of the specified benefit, step 1 of regulation 61I(2) is modified as follows—

Step 1

In cases where regulation 61J(1)(a), (b) or (c) applies, redetermine the cash equivalent [F190, relevant amount or amount foregone] of the specified benefit in accordance with regulations 61E, 61F or 61G, as the case may be. In cases where regulation 61J(1)(d) applies, use the cash equivalent [F190, relevant amount or amount foregone] of the benefit determined at the start of the year under step 1 of regulation 61D(1).

(4) Any references in regulation 61I(2) to the revised cash equivalent [F191, relevant amount or amount foregone in respect] of the benefit or to the amount obtained under step 1 of 61I(2) are to be read in accordance with paragraph (3).