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PART 6U.K.PAYE SETTLEMENT AGREEMENTS

Making and effect of PSAU.K.

[F1HMRC] and employer may make PSAU.K.

105.—(1) [F2HMRC] and an employer may agree that paragraph (2) applies in respect of income tax on qualifying general earnings of the employer’s employees for a tax year [F3and for any subsequent tax years].

(2) In relation to qualifying general earnings included in the agreement, the employer is—

(a)accountable to [F4HMRC] in accordance with the terms of the agreement and this Part, and

(b)not accountable in accordance with the rest of these Regulations.

(3) Such an agreement is referred to as a PAYE settlement agreement (“PSA”).

[F5(4) A PSA will continue to have effect until cancelled.]

Textual Amendments

Commencement Information

I1Reg. 105 in force at 6.4.2004, see reg. 1

Qualifying general earningsU.K.

106.—(1) Qualifying general earnings are those general earnings which meet conditions A and B.

(2) Condition A is that the general earnings consist of—

(a)taxable benefits provided or made available by reason of employments with the employer, or

(b)expenses paid to persons holding those employments.

(3) Condition B is that the employer and the Inland Revenue agree that the general earnings are—

(a)minor, as regards the amount of the sums paid or the type of benefit provided or made available,

(b)irregular, as regards the frequency in which, or the times at which, the sums are paid or the benefit is provided or made available,

(c)paid in circumstances where deduction of tax by reference to the tax tables is impracticable, or

(d)in the case of a benefit provided or made available, shared between employees so that apportionment of the benefit between the employees is impracticable.

(4) “Taxable benefit”, in relation to an employee, means any benefit provided or made available, other than in the form of a payment of money, to the employee or to a person who is a member of the employee’s family or household.

(5) General earnings to which regulation 112(2)(a) or (b) (pre-agreement general earnings etc) apply are not qualifying general earnings.

Commencement Information

I2Reg. 106 in force at 6.4.2004, see reg. 1

Effect of PSAU.K.

107.—(1) Qualifying general earnings included in the PSA are treated as excluded from an employee’s income for the purposes of determining the amount of the employee’s liability to income tax for the tax [F6years] to which the PSA relates.

(2) But this does not affect—

(a)the chargeability of those qualifying general earnings to income tax, or

(b)the employer’s liability under the PSA to account for income tax in respect of those qualifying general earnings.

(3) Sums in respect of income tax for which an employer is accountable to [F7HMRC] under a PSA are not to be treated, for the purposes of these Regulations, as tax deducted from relevant payments.

(4) An employee has no right to be treated as having paid tax in respect of sums for which the employer is accountable under a PSA, and accordingly is not entitled to claim or receive any refund of tax paid by the employer under the PSA.

(5) An employee must, subject to paragraph (6), be treated as relieved from any obligations under the Income Tax Acts—

(a)to keep records containing information relating to qualifying general earnings included in a PSA, or

(b)to deliver returns in respect of those qualifying general earnings.

(6) Paragraph (5) does not apply for the purposes of the obligations imposed on the employer under regulation 117 ([F8retention] of PSA records).

(7) Qualifying general earnings comprised in a PSA are not to be included—

(a)in a return by the employer under regulation [F967B, 67D, 67E,] 73, 74, or 75 (returns of relevant payments and tax deducted), nor

(b)in particulars provided by the employer under regulation 85 (annual return of other earnings ([F10Form P11D])).

Textual Amendments

F10Words in reg. 107(7)(b) substituted (with effect in accordance with reg. 1(3) of the amending S.I.) by The Income Tax (Pay As You Earn) (Amendment No. 4) Regulations 2015 (S.I. 2015/1927), regs. 1(1), 12

Commencement Information

I3Reg. 107 in force at 6.4.2004, see reg. 1

Payment of tax under PSAU.K.

Calculation of tax payable under PSAU.K.

108.—[F11(1) A PSA must provide that the employer is accountable to HMRC for the income tax due.]

[F12(1A) A PSA must provide for the sums due to be—

(a)computed annually in accordance with the factors specified in paragraph (2), and

(b)comprised of the amounts specified in paragraph (3)]

(2) The factors are—

(a)in the case of qualifying general earnings comprising sums paid in respect of expenses, the estimated aggregate amount of such payments on which income tax is chargeable, reduced by such amount (if any) as would have been deductible if the qualifying general earnings had not been included in the PSA;

(b)in the case of qualifying general earnings comprising benefits provided or made available, the estimated aggregate amount of the cash equivalents and other amounts on which income tax is chargeable, reduced by such amount (if any) as would have been deductible if the qualifying general earnings had not been included in the PSA;

(c)the total number of employees in receipt of qualifying general earnings comprised in the PSA;

[F13(d)the number of those employees respectively chargeable to income tax—

(i)at only the basic rate for the tax year to which the [F14computation] relates, and

(ii)at both the basic rate and the higher rate for that tax year; [F15and

(iii)at the basic, higher and additional rates for that tax year;] [F16and]

[F17(iv)at any Scottish rate applicable for the tax year to which the computation relates;]]

(e)such other matters as are agreed by [F18HMRC] and the employer to be relevant in relation to the qualifying general earnings comprised in the PSA.

(3) The amounts specified for the purposes of [F19paragraph (1A)(b)] are—

(a)an amount equal to income tax on the aggregate of the amounts computed in accordance with paragraph (2)(a) and (b), calculated so as to take account of the factor specified in paragraph (2)(d); and

(b)a further amount reflecting an estimate of the income tax on the benefit to the employees of having no tax liability on the qualifying general earnings included in the PSA.

Textual Amendments

Commencement Information

I4Reg. 108 in force at 6.4.2004, see reg. 1

Payment of tax and recovery proceedingsU.K.

109.—(1) The employer must pay to [F20HMRC] by the due date the aggregate amount for which the employer is accountable to [F21HMRC] under a PSA [F22in relation to the preceding tax year].

(2) “The due date” means 19th October following the end of [F23each tax year] to which the [F24computation] relates.

(3) Part 6 of TMA (collection and recovery) applies to the recovery of the aggregate amount or any part of it (“the amount of tax”) as if it were income tax charged on the employer.

(4) But summary proceedings for the recovery of the amount of tax may be brought in England, Wales or Northern Ireland at any time before the expiry of 12 months beginning with the due date.

(5) Proceedings may be brought for the recovery of the amount of tax without distinguishing the amounts which the employer is liable to pay in respect of each employee under the PSA and without specifying the employees in question.

(6) The amount of tax is one cause of action or one matter of complaint for the purposes of proceedings under sections 65, 66 and 67 of TMA(1) (magistrates' courts, county courts and inferior courts in Scotland).

Textual Amendments

Commencement Information

I5Reg. 109 in force at 6.4.2004, see reg. 1

Formal determination of tax payable by the employerU.K.

110.—(1) This regulation applies if it appears to the Inland Revenue that there may be an amount payable under regulation 109(1) for any tax year which has not been paid by the due date (as defined by regulation 109(2)).

(2) The Inland Revenue may determine the amount payable to the best of their judgment.

(3) If a determination is made, the Inland Revenue must serve notice of it on the employer.

(4) A determination under this regulation is subject to Parts 4, 5 [F25, 5A] and 6 of TMA (assessment, appeals, collection and recovery) as if—

(a)the determination were an assessment, and

(b)the amount determined were income tax charged on the employer,

and those Parts of TMA apply accordingly with any necessary modifications.

F26(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F25Word in reg. 110(4) inserted (in relation to the tax year 2010-11 and subsequent tax years) by The Income Tax (Pay As You Earn) (Amendment) Regulations 2010 (S.I. 2010/668), regs. 1(3), 3

Commencement Information

I6Reg. 110 in force at 6.4.2004, see reg. 1

Form and commencement of PSAU.K.

Form of PSAU.K.

111.—(1) A PSA must be—

(a)in writing, and

(b)signed and dated by the employer and [F27HMRC].

(2) A PSA must incorporate, whether by specification or indirect reference—

(a)the qualifying general earnings included in the PSA,

(b)the method of calculation, determined in accordance with regulation 108, of the amount of income tax for which the employer is to be accountable in respect of those qualifying general earnings, and

(c)the due date by which, in accordance with regulation 109, income tax in respect of those qualifying general earnings is due and payable.

[F28(3) In paragraph (1) “in writing” includes electronic communications and “signed” includes electronic signatures.]

Textual Amendments

Commencement Information

I7Reg. 111 in force at 6.4.2004, see reg. 1

Commencement of PSAU.K.

112.—(1) A PSA may be entered into at any time before 6th July following the end of the [F29first] tax year for which it is to have effect (“the year in question”).

(2) A PSA entered into after the beginning of the year in question cannot apply to—

(a)general earnings which, when the PSA is entered into, have been, or should have been, paid earlier in the year in question under deduction of tax in accordance with Part 3, or

(b)general earnings consisting of benefits which, when the PSA is entered into, are or were reflected in the employee’s code for the year in question in accordance with Part 2.

Textual Amendments

Commencement Information

I8Reg. 112 in force at 6.4.2004, see reg. 1

Variation and cancellation of PSAU.K.

Variation of PSAU.K.

113.—(1) [F30HMRC] and the employer may, by agreement and consistently with the provisions of this Part, vary the terms of a PSA entered into by them.

(2) The agreement must be—

(a)in writing, and

(b)signed and dated by the employer and by [F31HMRC].

(3) The last date for variation of a PSA is 6th July following the end of the [F32first tax year to which the variation relates] F33....

[F34(4) In paragraph (2) “in writing” includes electronic communications and “signed” includes electronic signatures.]

Textual Amendments

Commencement Information

I9Reg. 113 in force at 6.4.2004, see reg. 1

Cancellation of PSAU.K.

114.—[F35(1) Either HMRC or the employer may cancel a PSA.]

(2) Cancellation must be effected by [F36a notice in writing to the other party].

(3) A cancellation comes into effect from the date of the notice.

(4) If a PSA is cancelled, this Part does not apply to general earnings—

(a)to which the cancelled PSA related, and

(b)which are paid, or (as the case may be) provided or made available, after the employer receives notice of the cancellation.

[F37(5) In paragraph (2) “in writing” includes electronic communications.]

Textual Amendments

Commencement Information

I10Reg. 114 in force at 6.4.2004, see reg. 1

InterestU.K.

Interest on unpaid taxU.K.

115.—(1) This regulation applies if an employer has not paid to the Inland Revenue by the due date (as defined by regulation 109(2)) the full amount for which the employer is liable under this Part.

(2) The unpaid amount carries interest at the prescribed rate from the due date until payment (“the interest period”).

(3) Paragraph (2) applies even if the due date is a non-business day as defined by section 92 of the Bills of Exchange Act 1882(2).

(4) Any change made to the prescribed rate during the interest period applies to the unpaid amount from the date of the change.

(5) Interest is recoverable as if it were an amount payable under the PSA.

(6) “The prescribed rate” means the rate applicable under section 178 of the Finance Act 1989(3) for the purposes of section 86 of TMA(4).

Commencement Information

I11Reg. 115 in force at 6.4.2004, see reg. 1

Interest on overpaid taxU.K.

116.—(1) This regulation applies if tax in respect of [F38a tax year] to which a PSA relates is repaid to the employer after the due date (as defined by regulation 109(2)).

(2) The tax repaid carries interest at the prescribed rate from the later of—

(a)the due date [F39for a tax year], and

(b)the date on which the tax was paid,

until the order for the repayment is issued (“the interest period”).

(3) Any change made to the prescribed rate during the interest period applies to the tax repaid from the date of the change.

(4) “The prescribed rate” means the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 824 of ICTA(5).

Textual Amendments

Commencement Information

I12Reg. 116 in force at 6.4.2004, see reg. 1

RecordsU.K.

[F40Retention] of PSA recordsU.K.

117.—[F41(1) An employer must keep PSA records for not less than 3 years after the end of the most recent tax year to which they relate.]

(2) “PSA records” means all books, documents and other records relating to—

(a)the qualifying general earnings comprised in the PSA,

(b)the calculation of amounts for which the employer is accountable to [F42HMRC] in accordance with the PSA, and

(c)the payment of those amounts to [F43HMRC].

F44(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F45(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F46(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F47(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F48(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F49(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Commencement Information

I13Reg. 117 in force at 6.4.2004, see reg. 1

(1)

Section 65 was amended by section 57(1) of the Finance Act 1984 (c. 43) and paragraph 30 of Schedule 19 to the Finance Act 1998 (c. 36); section 66 was amended by section 57(2) of the Finance Act 1984, section 89(1) of the Finance Act 2001 (c. 9), S.I. 1980/397 (N.I. 3) and S.I. 1991/724; section 67 was amended by section 58 of the Finance Act 1976 (c. 40), section 156 of the Finance Act 1995 (c. 4) and section 89(1) of the Finance Act 2001.

(2)

1882 c. 61; section 92 was amended by sections 3(1) and 4(4) of the Banking and Financial Dealings Act 1971 (c. 80).

(3)

1989 c. 26, to which there are amendments not relevant to these Regulations.

(4)

Section 86 was substituted by section 110(1) of the Finance Act 1995 (c. 4) and amended by section 131 of, and paragraph 3 of Schedule 18 to, the Finance Act 1996 (c. 18).

(5)

Section 824 was amended by paragraph 7 of Schedule 13 to the Finance Act 1988 (c. 39), sections 110(5), 111(4), 158(2) and 179(1) of, and Parts 4, 8 and 10 of Schedule 17 to, the Finance Act 1989 (c. 26), paragraph 14(52) of Schedule 10 to the Taxation of Chargeable Gains Act 1992 (c. 12), paragraph 41 of Schedule 19 to the Finance Act 1994 (c. 9), section 92 of the Finance Act 1997 (c. 16), section 41 of the Finance Act 1999 (c. 16), section 90 of the Finance Act 2001 (c. 9), and paragraph 104 of Schedule 6 to ITEPA.