SCHEDULE 4F14Provisions derived from the Income Tax Acts and the Income Tax (Pay As You Earn) Regulations 2003
PART II DEDUCTION OF EARNINGS-RELATED CONTRIBUTIONS
Deduction of earnings-related contributions6
1
Every employer, on making during any year to any employee any payment of F21general earnings in respect of which earnings-related contributions are payable, or are treated as payable, or on making any payment of statutory maternity pay—
a
shall, if he has not already done so, prepare F57... a deductions working sheet for that employee, and
b
may deduct earnings-related contributions in accordance with this Schedule.
F421A
Where a liability to pay retrospective contributions has arisen in respect of an employee, an employer shall amend the relevant deductions working sheet or where necessary prepare one in respect of that employee.
2
Subject to sub-paragraph (3), an employer shall not be entitled to recover any earnings-related contributions paid or to be paid by him on behalf of any employee otherwise than by deduction in accordance with this Schedule.
3
Sub-paragraph (2) does not apply to secondary Class 1 contributions in respect of which an election has been made jointly by the secondary contributor and the employed earner for the purposes of paragraph 3B(1) of Schedule 1 to the Act (election in respect of transfer of secondary contribution liability on F33relevant employment income) F1 if the election provides for the collection of the amount in respect of which liability is transferred.
Calculation of deduction7
1
Subject to sub-paragraph (2), on making any payment of F15general earnings to the employee, the employer may deduct from those F15general earnings the amount of the earnings-related contributions based on those F15general earningsF34... which the employee is liable to pay under section 6(4) of the Act F41(the “section 6(4)(a) amount”).
2
Where two or more payments of F15general earnings fall to be aggregated, the employer may deduct the amount of the earnings-related contributions based on those F15general earnings, which are payable by the employee, either wholly from one such payment or partly from one and partly from the other or any one or more of the others.
F373
If the employer–
a
b
is treated as making a payment of F15general earnings by paragraph 4A,
he may recover, in a case falling within paragraph (a) the amount not so deducted or, in a case falling within paragraph (b) the section 6(4)(a) amount, by deduction from any subsequent payment of F15general earnings made by the employer to that employee during F9the same year and, where the case falls within paragraph (b) F17or sub-paragraph 4(a) or (f).
This sub-paragraph is subject to sub-paragraphs (4) and (5).
F433A
Where an amount has been treated as retrospective earnings paid to or for the benefit of an employee, the employer may deduct the retrospective contributions based on those earnings from any payment of general earnings made by him to that employee—
a
after the relevant retrospective contributions regulations come into force, and
b
during the same and the following year.
This sub-paragraph is subject to sub-paragraph (5).
4
Sub-paragraph (3) applies only where—
a
the under-deduction occurred by reason of an error made by the employer in good faith;
b
c
the under-deduction occurred as a result of the cancellation, variation or surrender of the contracting-out certificate issued in respect of the employment in respect of which the payment of F15general earnings is made; or
d
F18f
the payment in question is made to a person whose place of employment is outside the United Kingdom and on whose general earnings Class 1 contributions are, but income tax is not, payable.
5
For the purposes of sub-paragraphs (3), F44(3A), (4), (8) and (11)—
a
the amount which by virtue of those sub-paragraphs may be deducted from any payment, or from any payments which fall to be aggregated, shall be an amount in addition to, but not in excess of, the amount deductible from those payments under the other provisions of this Schedule; and
b
for the purposes of Part III of this Schedule an additional amount which may be deducted by virtue of those sub-paragraphs F35in a case falling within paragraph (a) of any of those sub-paragraphs F45except sub-paragraph (3A) shall be treated as an amount deductible under this Schedule only in so far as the amount of the corresponding under-deduction has not been so treated.
F10This is subject to the following qualification.
F115A
Where a payment—
a
falls within sub-paragraph (4)(e) F31or (f),
b
comprises a beneficial interest in F13securities, or
c
is treated as earnings within the meaning of Part 7 of the Income Tax (Earnings and Pensions) Act 2003,
sub-paragraph (5B) applies.
5B
If this sub-paragraph applies—
a
sub-paragraph (5)(a) shall have effect as if “, but not in excess of,” were omitted; and
b
sub-paragraph (8) shall have effect as if at the end there were added “or the following year”
6
Sub-paragraph (8) applies where an employer makes a payment consisting either soley of non-monetary earnings, or a combination of monetary and non-monetary earnings, to—
a
an employee;
b
an ex-employee,
and at the time of the payment of those earnings there are no, or insufficient, monetary earnings from which the employer could deduct the F40section 6(4)(a) amount.
7
In sub-paragraph (6)(b) “ex-employee” means a person who—
a
ceases to be employed by the employer in a particular year (“the cessation year”); and
b
receives such earnings from the employer after the cessation of employment but in the cessation year.
F398
Where, in the circumstances specified in sub-paragraph (6), the employer–
a
does not deduct from the earnings referred to in that sub-paragraph the full section 6(4)(a) amount, or
b
is treated as making a payment of F15general earnings by paragraph 4A,
he may recover, in a case falling within paragraph (a) the amount not so deducted or, in a case falling within paragraph (b) the section 6(4)(a) amount, by deduction from any subsequent payment of monetary earnings to that employee, or ex-employee (as the case may be) during the same year.
This sub-paragraph is subject to sub-paragraph (5).
9
Sub-paragraph (11) applies if—
a
a person (“the ex-employee”) ceases in a particular tax year (“the cessation year”) to be employed by a particular employer (“the employer”); and
b
the ex-employee receives from the employer in the cessation year, after the cessation of employment, earnings in the form of—
i
a beneficial interest in F24securities,
ii
iii
any gain on which the ex-employee is chargeable to tax by virtue of F26section 4(4)(a) of the Act; and
c
at the time of the payment of those earnings there are no monetary earnings, or insufficient monetary earnings, from which the employer could deduct the F38section 6(4)(a) amount.
F2710
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F28...
11
Where, in the circumstances specified in sub-paragraph (9), the employer has not deducted, from the earnings referred to in sub-paragraph (9)(b), the full amount of earnings-related contributions which by virtue of this Schedule he is entitled to deduct, he may, without prejudice to sub-paragraph (8) but subject to sub-paragraph (12)(b), recover the amount so under-deducted by deduction from the proceeds of sale of some, or all, of—
a
the F29securities referred to in of sub-paragraph 9(b)(i) and (ii); or
b
the F29securities which form the subject matter of the option referred to in sub-paragraph (9)(b)(iii).
12
For the purposes of sub-paragraph (11)—
a
the whole of the amount under-deducted may be recovered from the proceeds of sale of some, or all, of the F29securities referred to in that sub-paragraph; and
b
the employee’s prior written consent to that sale and the recovery of all or part of the under-deduction from the proceeds thereof, shall be required.
13
Subject to sub-paragraph (14), the employer shall record on the deductions working sheet for that employee the name and national insurance number of the employee, the year to which the working sheet relates, the appropriate category letter in relation to the employee (being the appropriate category letter indicated by the Board) and, in so far as relevant to that category letter, the following particulars regarding every payment of F15general earnings which he makes to the employee namely—
a
the date of payment;
b
the amount of—
i
earnings up to and including the current lower earnings limit where earnings equal or exceed that figure,
F54ii
earnings which exceed the current lower earnings limit but do not exceed the current primary threshold,
F53iii
earnings which exceed the current primary threshold but do not exceed the upper accrual point,
F46iiia
earnings which exceed the upper accrual point but do not exceed the current upper earnings limit,
F6iv
the sum of the primary Class 1 contributions and secondary Class 1 contributions payable on all the employee’s earnings, other than contributions recovered under sub-paragraph (3); and
v
the primary Class 1 contributions payable on the employee’s earnings;
vi
any statutory maternity pay;
F61viia
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ix
any statutory shared parental pay.
The amounts to be recorded under sub-paragraphs (iv) and (v) are the amounts of contributions after deducting the amount of any reduction calculated in accordance with section 41(1) to (1B) F52... of the Pensions Act (“the reduction”), subject to the following qualification.
If the amount of the reduction exceeds the amount of the contributions in respect of which it falls to be made, the amount to be entered under sub-paragraph (v) is nil.
F4c
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
Where 2 or more payments of F15general earnings fall to be aggregated, the employer, instead of recording under heads (iv) and (v) of sub-paragraph (13)(b) separate amounts in respect of each such payment, shall under each head record a single amount, being the total of the contributions appropriate to the description specified in that head, in respect of the aggregated payments.
15
When an employer pays F15general earnings he shall record under the name of the employee to whom he pays the F15general earnings—
a
the date of payment;
c
any allowable F30pension contributions;
and retain the record for a period of three years after the end of the tax year in which the F15general earnings were paid.
F32Records where liability transferred from secondary contributor to employed earner: relevant employment income8
Where an election has been made for the purposes of paragraph 3B(1) of Schedule 1 to the Act (elections about transfer of liability for secondary contributions in respect of relevant employment income), the secondary contributor shall maintain records containing—
a
a copy of any such election;
b
a copy of the notice of approval issued by the Inland Revenue under paragraph 3B(1)(b) of that Schedule;
c
the name and address of the secondary contributor who has entered into the election;
d
the name of the employed earner; and
e
the national insurance number allocated to the employed earner.
Certificate of contributions paid9
1
Where the employer is required to give the employee a certificate in accordance with F19regulation 67 of the PAYE Regulations (information to employees about payments and tax deducted (Form P 60)), the employer shall enter on the certificate, in respect of the year to which the certificate relates—
a
the amount of any earnings up to and including the current lower earnings limit where earnings equal or exceed that figure;
b
the amount of any earnings in respect of which primary Class 1 contributions were, by virtue of section 6A of the ActF3, treated as having been paid, which exceed the current lower earnings limit but do not exceed the current primary threshold, other than earnings from non-contracted-out employment in respect of which primary Class 1 contributions were, by virtue of that section and regulation 127, treated as having been paid at the reduced rate;
c
the amount of any earnings in respect of which primary Class 1 contributions were payable which exceed the current primary threshold but do not exceed the F47upper accrual point, other than earnings from non-contracted-out employment in respect of which primary Class 1 contributions were payable at the reduced rate;
F48ca
the amount of any earnings in respect of which primary Class 1 contributions were payable which exceed the upper accrual point but do not exceed the current upper earnings limit, other than earnings from non-contracted-out employment in respect of which primary Class 1 contributions were payable at the reduced rate;
d
the amount of the earnings, if any, recorded under paragraphs (b) and (c), above the current lower earnings limit, in respect of which primary Class 1 contributions were payable or, where section 6A of the Act and regulation 127 applies, were treated as having been paid, at the reduced rate;
e
the amount of primary Class 1 contributions paid by the employee;
F7f
the amount of statutory maternity pay paid to the employee;
h
the amount of statutory adoption pay paid to the employeeF59; and
i
the amount of statutory shared parental pay paid to the employee;
2
a
has paid, or
b
is treated, by virtue of section 6A of the Act, as having paid,
primary Class 1 contributions in that year, the employer shall nevertheless give the employee such a certificate showing the information referred to in sub-paragraph (1).
F563
In sub-paragraph (2), “relevant payments” has the meaning given in the PAYE Regulations.
Sch. 4 heading substituted (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 29(2)