SCHEDULE 4U.K. [F1Provisions derived from the Income Tax Acts and the Income Tax (Pay As You Earn) Regulations 2003]

Textual Amendments

PART IIU.K. DEDUCTION OF EARNINGS-RELATED CONTRIBUTIONS

Deduction of earnings-related contributionsU.K.

6.—(1) Every employer, on making during any year to any employee any payment of F2[F3... earnings] in respect of which earnings-related contributions are payable, or are treated as payableF4...—

(a)shall, if he has not already done so, prepare F5... a deductions working sheet for that employee, and

(b)may deduct earnings-related contributions in accordance with this Schedule.

[F6(1A) 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 [F7relevant employment income]) F8 if the election provides for the collection of the amount in respect of which liability is transferred.

Textual Amendments

F5Words in Sch. 4 para. 6(1)(a) omitted (with effect in accordance with reg. 1(3) of the amending S.I.) by virtue of The Social Security (Contributions) (Amendment and Application of Schedule 38 to the Finance Act 2012) Regulations 2013 (S.I. 2013/622), regs. 1, 4(3)

F7Words in Sch. 4 para. 6(3) substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Social Security (Contributions) (Amendment No. 4) Regulations 2004 (S.I. 2004/2096), regs. 1(1), 7(a)

F8Paragraph 3B was inserted by section 77(2) of the Child Support, Pensions and Social Security Act 2000 (c. 19).

Calculation of deductionU.K.

7.—(1) Subject to sub-paragraph (2), on making any payment of F9[F10... earnings] to the employee, the employer may deduct from those F9[F10... earnings] the amount of the earnings-related contributions based on those F9[F10... earnings] F11... which the employee is liable to pay under section 6(4) of the Act [F12(the “section 6(4)(a) amount”)].

[F13(1A) On making any chain payment the [F14deemed employer] may deduct the amount of earnings related contributions calculated by reference to the deemed direct earnings which the [F14deemed employer] is liable to pay.]

[F15(1B) In sub-paragraph (1A) “chain payment”, “deemed direct earnings” and “deemed employer” have the meanings given in regulations 14(2)(a), 14(3) and 20(5) respectively of the Social Security Contributions (Intermediaries) Regulations 2000.]

(2) Where two or more payments of F9[F10... earnings] fall to be aggregated, the employer may deduct the amount of the earnings-related contributions based on those F9[F10... 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.

[F16(3) If the employer–

(a)on making any payment of F9[F10... earnings] to an employee does not deduct from those F9[F10... earnings] the full section 6(4)(a) amount, or

(b)is treated as making a payment of F9[F10... 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 F9[F10... earnings] made by the employer to that employee during [F17the same year and, where the case falls within paragraph (b) [F18or sub-paragraph 4(a) or (f)]].

[F19(3A) 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 F9... 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)the F9[F10... earnings] in respect of which the under-deduction occurred are treated as earnings by virtue of regulations made under section 112 of the Act (certain sums to be earnings)F20;

F21(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d)the F9[F10... earnings] in respect of which the under-deduction occurred are, by virtue of regulation 23, not paid through the secondary contributor in relation to the employment; F22...

[F23(e) the employer is treated as making a payment of F9[F10... earnings] by paragraph 4A][F24; or]

[F25(f)the payment in question is made to a person whose place of employment is outside the United Kingdom and on whose F9... earnings Class 1 contributions are, but income tax is not, payable.]

(5) For the purposes of sub-paragraphs (3), [F26(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 [F27in a case falling within paragraph (a) of any of those sub-paragraphs [F28except 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.

[F29This is subject to the following qualification.]

[F30(5A) Where a payment—

(a)falls within sub-paragraph (4)(e) [F31or (f)],

(b)comprises a beneficial interest in [F32securities], 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 [F33section 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.

[F34(8) 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 F9[F10... 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.

(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 [F35securities],

(ii)a conditional interest in [F35securities] or a beneficial interest in convertible [F35securities] treated as earnings under [F36regulation 22(5), (6) or (7)],

(iii)any gain on which the ex-employee is chargeable to tax by virtue of [F37section 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].

F39(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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 [F41securities] referred to in of sub-paragraph 9(b)(i) and (ii); or

(b)the [F41securities] 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 [F41securities] 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 F9[F10... 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,

[F42(ii)earnings which exceed the current lower earnings limit but do not exceed the current primary threshold,]

[F43(iii)earnings which exceed the current primary threshold but do not exceed the [F44current upper earnings limit],]

F45(iiia). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F46(iv)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;

[F47(vii)any F48... statutory paternity pay;

F49(viia). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F50(viii)any statutory adoption pay[F51; F52...

(ix)any statutory shared parental pay]][F53; and

(x)any statutory parental bereavement pay.]

F54...

F55(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(14) Where 2 or more payments of F9[F10... 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 F9[F10... earnings] he shall record under the name of the employee to whom he pays the F9[F10... earnings]—

(a)the date of payment;

(b)the amount of the F9[F10... earnings], excluding any allowable [F56pension] contributions; and

(c)any allowable [F56pension] contributions;

and retain the record for a period of three years after the end of the tax year in which the F9[F10... earnings] were paid.

Textual Amendments

F11Word in Sch. 4 para. 7(1) omitted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(2)

F12Words in Sch. 4 para. 7(1) inserted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(2)

F16Sch. 4 para. 7(3) substituted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(3)

F20Section 112 was amended by paragraph 51(4) of Schedule 1 to the Employment Rights Act 1996 (c. 18) and paragraph 21 of Schedule 3 to the Transfer Act.

F23Sch. 4 para. 7(4)(e) and word inserted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(4)

F27Words in Sch. 4 para. 7(5)(b) inserted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(5)

F33Words in Sch. 4 para. 7(6) substituted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(6)

F34Sch. 4 para. 7(8) substituted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(7)

F38Words in Sch. 4 para. 7(9)(c) substituted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(8)

F46Sch. 4 para. 7(13)(b)(iv)-(v) substituted (with effect in accordance with reg. 1(1) of the amending S.I.) by The Social Security (Contributions) (Amendment) Regulations 2003 (S.I. 2003/193), regs. 1(1), 16(2)(a)(i)

F47Sch. 4 para. 7(13)(b)(vii)(viia) substituted for Sch. 4 para. 7(13)(b)(vii) (14.11.2010) by The Social Security (Contributions) (Amendment No. 5) Regulations 2010 (S.I. 2010/2450), regs. 1, 4(2)

F50Sch. 4 para. 7(13)(b)(vii)-(viii) and words inserted (with effect in accordance with reg. 1(1) of the amending S.I.) by The Social Security (Contributions) (Amendment) Regulations 2003 (S.I. 2003/193), regs. 1(1), 16(2)(a)(ii)

F52Word in Sch. 4 para. 7(13)(b)(viii) omitted (6.4.2020) by The Social Security (Contributions) (Amendment) Regulations 2020 (S.I. 2020/239), regs. 1, 2(3)(a)(i) (which amendment was extended to N.I. (6.4.2022) by S.I. 2022/384, reg. 3)

F53Sch. 4 para. 7(13)(b)(x) and word inserted (6.4.2020) by The Social Security (Contributions) (Amendment) Regulations 2020 (S.I. 2020/239), regs. 1, 2(3)(a)(ii) (which amendment was extended to N.I. (6.4.2022) by S.I. 2022/384, reg. 3)

F55Sch. 4 para. 7(13)(c) omitted (with effect in accordance with reg. 1(1) of the amending S.I.) by virtue of The Social Security (Contributions) (Amendment) Regulations 2003 (S.I. 2003/193), regs. 1(1), 16(2)(b)

[F57Records where liability transferred from secondary contributor to employed earner: relevant employment incomeU.K.

8.  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.]

Textual Amendments

F57Sch. 4 para. 8 heading substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Social Security (Contributions) (Amendment No. 4) Regulations 2004 (S.I. 2004/2096), regs. 1(1), 7(b)

Certificate of contributions paidU.K.

9.—(1) Where the employer is required to give the employee a certificate in accordance with [F58regulation 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 ActF59, treated as having been paid, which exceed the current lower earnings limit but do not exceed the current primary thresholdF60...;

(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 [F61current upper earnings limit]F62...;

F63(ca). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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;

[F64(f)the amount of statutory maternity pay paid to the employee;

[F65(g)the amount of F66... statutory paternity pay paid to the employee;

F67(ga). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F68...]

(h)the amount of statutory adoption pay paid to the employee[F69; F70...]

(i)the amount of statutory shared parental pay paid to the employee;][F71; and

(j)the amount of statutory parental bereavement pay paid to the employee;]

and shall enter the amounts under [F72paragraph (e)] under the appropriate category letter indicated by the [F73Inland Revenue].

(2) Where the employer is not required to give the employee a certificate in accordance with [F74regulation 67 of the PAYE Regulations], because no tax has been deducted from the employee’s [F75relevant payments] during the year concernedF76..., [F77but the employee—

(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).]

[F78(3) In sub-paragraph (2), “relevant payments” has the meaning given in the PAYE Regulations.]

Textual Amendments

F59Section 6A was inserted by paragraph 3 of Part I of Schedule 9 to the Welfare Reform Act.

F64Sch. 4 para. 9(1)(f)-(h) inserted (with effect in accordance with reg. 1(1) of the amending S.I.) by The Social Security (Contributions) (Amendment) Regulations 2003 (S.I. 2003/193), regs. 1(1), 16(3)(a)

F65Sch. 4 para. 9(1)(g)(ga) substituted for Sch. 4 para. 9(1)(g) (14.11.2010) by The Social Security (Contributions) (Amendment No. 5) Regulations 2010 (S.I. 2010/2450), regs. 1, 4(3)

F70Word in Sch. 4 para. 9(1)(h) omitted (6.4.2020) by The Social Security (Contributions) (Amendment) Regulations 2020 (S.I. 2020/239), regs. 1, 2(3)(b)(i) (which amendment was extended to N.I. (6.4.2022) by S.I. 2022/384, reg. 3)

F71Sch. 4 para. 9(1)(j) and word inserted (6.4.2020) by The Social Security (Contributions) (Amendment) Regulations 2020 (S.I. 2020/239), regs. 1, 2(3)(b)(ii) (which amendment was extended to N.I. (6.4.2022) by S.I. 2022/384, reg. 3)

F72Words in Sch. 4 para. 9(1) substituted (with effect in accordance with reg. 1(1) of the amending S.I.) by The Social Security (Contributions) (Amendment) Regulations 2003 (S.I. 2003/193), regs. 1(1), 16(3)(b)