The Income Tax (Pay As You Earn) Regulations 2003

PART 2 U.K. CODES

Determination of code U.K.

Determination of code by Inland Revenue U.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 code U.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(1) (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).

[F1 Determination of code in respect of recovery of relevant debts U.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.]

Textual Amendments

F1 Reg. 14A inserted (with effect from 6.4.2012) by The Income Tax (Pay As You Earn) (Amendment) (No.3) Regulations 2011 (S.I. 2011/1584), regs. 1(2), 2(2)

[F2 Determination of code in respect of high income child benefit charge U.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.]

Textual Amendments

F2 Reg. 14B inserted (with application in relation to the tax year 2013-14 and subsequent tax years) by The Income Tax (Pay As You Earn) (Amendment) Regulations 2013 (S.I. 2013/521), regs. 1(2), 3

[F3 Determination of code in respect of recovery of tax credit debts U.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.

Textual Amendments

F3 Regs. 14C, 14D inserted (with effect in accordance with art. 1(3) of the amending S.I.) by The Income Tax (Pay As You Earn) (Amendment No. 4) Regulations 2014 (S.I. 2014/2689), regs. 1(1), 4

Recovery of debts: overall limit U.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.

TABLE 1A

TOTAL AMOUNT OF DEBT THAT MAY BE RECOVERED

1 The expected amount of PAYE income of E in the tax year for which the code is determined	2 The total amount of debt that may be recovered from E in that tax year
Less than £30,000	No more than £3,000
£30,000 or more but less than £40,000	No more than £5,000
£40,000 or more but less than £50,000	No more than £7,000
£50,000 or more but less than £60,000	No more than £9,000
£60,000 or more but less than £70,000	No more than £11,000
£70,000 or more but less than £80,000	No more than £13,000
£80,000 or more but less than £90,000	No more than £15,000
£90,000 or more	No more than £17,000.

(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).]

Textual Amendments

F3 Regs. 14C, 14D inserted (with effect in accordance with art. 1(3) of the amending S.I.) by The Income Tax (Pay As You Earn) (Amendment No. 4) Regulations 2014 (S.I. 2014/2689), regs. 1(1), 4

Flat rate codes U.K.

15.— [F4 (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.

[F5 (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 [F6 sections 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.

[F7 (4A) For the purposes of this regulation an “appropriate Scottish upper rate code” has the meaning given in regulation 7(4).]

Textual Amendments

F4 Reg. 15(A1) inserted (6.4.2011) by The Income Tax (Pay As You Earn) (Amendment) Regulations 2011 (S.I. 2011/729), regs. 1, 5

F5 Reg. 15(2A) inserted (6.4.2018) by The Income Tax (Pay As You Earn) (Amendment) Regulations 2018 (S.I. 2018/267), regs. 1, 5(a)

F6 Words in reg. 15(3)(c) substituted (6.4.2006) by The Taxation of Pension Schemes (Consequential Amendments) Order 2006 (S.I. 2006/745), arts. 1, 27(3)

F7 Reg. 15(4A) inserted (6.4.2018) by The Income Tax (Pay As You Earn) (Amendment) Regulations 2018 (S.I. 2018/267), regs. 1, 5(b)

Continued application of employee’s code U.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 code U.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; ...

[F8 (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.]

Textual Amendments

F8 Reg. 17(2)(b)-(d) substituted for reg. 17(2)(b) (29.1.2015) by The Income Tax (Pay As You Earn) (Amendment) Regulations 2015 (S.I. 2015/2), regs. 1(1), 2(3)(b)

Appeals and amendment U.K.

Objections and appeals against employee’s code U.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) [F9 On an appeal that is notified to the tribunal, the tribunal] must determine the code in accordance with these Regulations.

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

Textual Amendments

F9 Words in reg. 18(4) substituted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 2 para. 94(3)

Amendment of code U.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 [F10 tribunal].

(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.

[F11 (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).

Textual Amendments

F10 Word in reg. 19(1) substituted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 2 para. 95

F11 Reg. 19(4) substituted (29.1.2015) by The Income Tax (Pay As You Earn) (Amendment) Regulations 2015 (S.I. 2015/2), regs. 1(1), 2(4)

Notice to employer of amended code U.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.

(1)

Section 30 was substituted by section 149(1) of the Finance Act 1982 (c. 39), and subsection (1) was amended by paragraph 13(2) of Schedule 19 to the Finance Act 1998 (c. 36).