The Income Tax (Pay As You Earn) Regulations 2003

Payments in short payment periods

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).