The Income Tax (Pay As You Earn) Regulations 2003

The cumulative basis

The cumulative basis

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

Cumulative basis: deduction and repayment

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 if the employee’s code is a K code, 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 monthly

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 intervals

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).