The Income Tax (Pay As You Earn) Regulations 2003

PART 1INTRODUCTION

Citation and commencement

1Citation and commencement

2Interpretation

2AReal Time Information employers

2BReal Time Information pension payers

3Net PAYE income

4Relevant payments

5Excluded business expenses

6Relevant pension payments

7Meaning of “code” etc

8Employee’s code

9PAYE threshold

Application to payers and payees

10Application to agencies and agency workers

11Application to pension payers and pensioners

12Application to other payers and payees

Determination of code

13Determination of code by Inland Revenue

14Matters relevant to determination of code

14ADetermination of code in respect of recovery of relevant debts

14BDetermination of code in respect of high income child benefit charge

14CDetermination of code in respect of recovery of tax credit debts

14DRecovery of debts: overall limit

15Flat rate codes

16Continued application of employee’s code

17Notice to employee of code

Appeals and amendment

18Objections and appeals against employee’s code

19Amendment of code

20Notice to employer of amended code

PART 3DEDUCTION AND REPAYMENT OF TAX

CHAPTER 1DEDUCTION AND REPAYMENT

Deduction and repayment by reference to employee’s code

21Deduction and repayment of tax by reference to employee’s code

The cumulative basis

22The cumulative basis

23Cumulative basis: deduction and repayment

24Cumulative basis: employee not paid weekly or monthly

25Cumulative basis: subsidiary PAYE income of employee paid weekly or at greater intervals

The non-cumulative basis

26The non-cumulative basis

27Non-cumulative basis: general rule for deductions

28Non-cumulative basis: modification of general rule

29Non-cumulative basis: aggregation of payments

30Non-cumulative basis: employee not paid weekly or monthly

31Payments in short payment periods

Higher rate, additional rate and nil tax codes

32Higher rate code: deductions

32AAdditional rate code: deductions

33Nil tax code: no deductions or repayments

Simplified deduction scheme

34Simplified deduction scheme for personal employees

35Simplified deduction schemes: records

Cessation of employment

36Cessation of employment: Form P45

36AIncome subject to retrospective tax provision — information to employee

37PAYE income paid after employment ceased

37AIncome paid after cessation of employment subsequently becoming subject to PAYE

38Death of employee

39Death of pensioner

Employee’s duty to provide Form P45

40Duty of employee to give new employer Form P45

40ADuty of employee to assist with completion of new employee fields in returns under regulations 67B and 67D

CHAPTER 2NEW EMPLOYEES (OTHER THAN PENSIONERS): FORMS P45 AND P46

41Scope of Chapter 2

42Procedure if employer receives Form P45

43Form P45 for current tax year

44Form P45 for previous tax year: employment starting on or before 24th May

45Other Forms P45

45AApplication of regulations 46 to 49E: Real Time Information employers and non-Real Time Information employers

46Form P46 where employer does not receive Form P45 and code not known

47Procedure in Form P46 cases: (a) seconded expatriate is national of EEA state or Commonwealth citizen, or (b) employee is not seconded expatriate and Statement A applies

48Procedure in Form P46 cases: (a) Statement B applies (not seconded expatriate), or (b) Statement B or C applies (seconded expatriate)

49Procedure in Form P46 cases: (a) Statement C applies (not seconded expatriate), or (b) Statement A applies (seconded expatriate)...

49AProcedure where employee fails to assist with completion of new employee fields in returns under regulations 67B and 67D

49BProcedure where no Form P45 and code not known: application of regulations 49C to 49E

49CProcedure where no Form P45 and: (a) employee is not a seconded expatriate and paragraph 41(a) of Schedule A1 applies; or (b) seconded expatriate is national of EEA state

49DProcedure where no Form P45 and: (a) employee is not a seconded expatriate and paragraph 41(b) of Schedule A1 applies; or (b) employee is a seconded expatriate and paragraph 43(b) or 43(c) of Schedule A1 applies

49EProcedure where no Form P45 and: (a) employee is a not seconded expatriate and paragraph 41(c) of Schedule A1 applies; or (b) employee is a seconded expatriate and paragraph 43(a) of Schedule A1 applies

50No Form P45: code treated as issued by HMRC

50AProcedure in cases of retrospective earnings: code treated as issued by HMRC

51Late presentation of Form P45

52Late presentation of Form P45: employer’s duties

53No Form P45: subsequent procedure on issue of employee’s code

CHAPTER 3NEW PENSIONERS: FORMS P45 AND P46(PEN)

54Scope of Chapter 3

54ZAApplication of this Chapter to Real Time Information pension payers

54ARelevant pension payments and relevant payments being received by a pensioner

54BProcedure in regulation 54A cases: code treated as issued by HMRC

55PAYE pension income paid by former employer

56PAYE pension income paid by other pension payer

57Information to be provided in Form P46(Pen) if code not known: non UK residents

58Procedure if no Form P45 and code not known: UK pensioners

58AProcedure if no Form P45 and code not known where payment is a relevant lump sum payment

59UK resident pensioner’s code treated as issued by Inland Revenue

60Late presentation of Form P45

61Subsequent procedure on issue of UK resident pensioner’s code

CHAPTER 3ABENEFITS IN KIND

61AInterpretation

61BPAYE: benefits in kind

61CAuthorised employer

61DDeduction and repayments of tax: general rule

61EMethod of calculating the cash equivalent of the benefit of a car or van

61FMethod of calculating the cash equivalent of the benefit of fuel

61GMethod of calculating the cash equivalent of non-cash vouchers, credit-tokens and employment-related benefits

61HModification of the general rule: cessation of employment but continuing benefit

61IModification of the general rule: in-year adjustments: change to the benefit during the year with effect from the date of the change

61JModification of the general rule: in-year adjustments: change to the benefit during the year with effect from the start of tax year and other changes

61KModification of the general rule: making good

61LModification of the general rule: failure to make good fuel benefit

61LAModification of the general rule: failure to make good benefit of credit-token

61MInformation to specified employees

CHAPTER 4MISCELLANEOUS

62Deductions in respect of notional payments

63Repayment during unpaid leave

64Trade disputes

65Repayment if no longer employed

66Deductions working sheets

66ADeduction working sheets: retrospective employment income in closed tax year

67Information to employees about payments and tax deducted (Form P60)

67ARevised information to employees about payments and tax deducted (Form P 60)

PART 4PAYMENTS, RETURNS AND INFORMATION

CHAPTER 1PAYMENT OF TAX AND ASSOCIATED RETURNS

Real time returns

67BReal time returns of information about relevant payments

67BAEmployees in respect of whom employer is not required to maintain deductions working sheets

67BBEmployees paid in specified circumstances

67BCRegulations 67BA and 67BB: supplementary

67CModification of the requirements of regulation 67B: notional payments

67CANotifications of relevant payments to and by providers of certain electronic payment methods

67DExceptions to regulation 67B

67EReturns under regulations 67B and 67D: amendments

67EAFailure to make a return under regulation 67B or 67D

67FAdditional information about payments

Payment and recovery of tax by employer

67GPayments to and recoveries from HMRC for each tax period by Real Time Information employers

67HPayments to and recoveries from HMRC for each tax period by Real Time Information employers: returns under regulation 67E(6)

Penalties under Schedule 55 to the Finance Act 2009

67IPenalty: failure to comply with regulation 67B or 67D

67JPenalty: initial period

67KPenalty: first failure to deliver a return in a tax year

68Periodic payments to and recoveries from HMRC: non-Real Time Information employers

69Due date and receipts for payment of tax

69ACircumstances in which payment of a lesser amount is to be treated as payment in full for the purposes of paragraph 6(2) of Schedule 56 to the Finance Act 2009

70Quarterly tax periods

71Modification of regulations 67G and 68 in case of trade dispute

72Recovery from employee of tax not deducted by employer

72AEmployer’s request for a direction and appeal against refusal

72BEmployee’s appeal against a direction notice where condition A is met

72CEmployee’s appeal against a direction notice where condition B is met

72DAppeals: supplementary provisions

72EConditions where regulation 72F applies

72FRecovery from employee of tax that has been self-assessed etc.

72GEmployee’s appeal against a direction notice

Annual returns of relevant payments and tax

72HApplication of regulations 73 to 75

73Annual return of relevant payments liable to deduction of tax (Forms P35 and P14)

73AAmended returns of relevant payments and tax (Forms P14 and P35(RL))

74Annual return of relevant payments not liable to deduction of tax (Form P38A)

75Additional return in case of trade dispute

Failure to account for deductible tax

75APower of HMRC to issue a notice and certificate in cases where regulation 67B or 67D returns are not made, etc

75BCertificates under regulation 75A: excess payments

76Certificate if tax in regulation 73 return is unpaid

77Return and certificate if tax may be unpaid : amounts due under regulation 68

78Notice and certificate if tax may be unpaid : amounts due under regulation 68

79Certificate after inspection of PAYE records

80Determination of unpaid tax and appeal against determination

81Employee liability if tax unpaid after regulation 80 determination

81AEmployee’s appeal against direction notice

82Interest on tax overdue

83Interest on tax overpaid

84Recovery of tax and interest

Continental shelf workers: provisions relating to certificates

84AApplication for certificate

84BUKCS continental shelf workers certificate holder: obligations

84CUKCS oil field licensee certificate

84DInterpretation of regulations 84A to 114C

Employment Intermediaries: return of information relating to agency workers for whom they have not operated PAYE

84ESpecified employment intermediaries

84FReturns by specified employment intermediaries

84GSpecified information

84HRetention of records

CHAPTER 2OTHER RETURNS AND INFORMATION

Returns involving PAYE income other than payments

85Employers: annual return of other earnings (form P11D)

86Information employer must provide for each employee

87Information employer must also provide for benefits code employees

88Annual return of other earnings: amounts

89Annual return of other earnings: exclusion for notional payments

90Quarterly return if a car becomes available or unavailable (Form P46 (Car))

91Termination awards: information to be provided

92Termination awards: return if award changes

93Termination awards: return if more than one employer

Information to be given to employees

94Employers: information to employees of other earnings (Form P11D)

95Third parties: information to employees of other earnings

96Termination awards: information to employees

CHAPTER 3PAYE RECORDS

97Retention by employer of PAYE records

CHAPTER 3ACertain debts of companies under Chapter 7 of Part 2 of ITEPA (agencies)

97ZAInterpretation of Chapter 3A

97ZBLiability of directors for relevant PAYE debts

97ZCAppeals in relation to personal liability notices

97ZDWithdrawal of personal liability notices

97ZERecovery of sums due under personal liability notice: application of Part 6 of TMA

97ZFRepayment of surplus amounts

CHAPTER 3BCertain debts of companies under section 339A of ITEPA (travel expenses of workers providing services through employment intermediaries)

97ZGInterpretation of Chapter 3B: “relevant PAYE debt” and “relevant date”

97ZHInterpretation of Chapter 3B: general

97ZILiability of directors for relevant PAYE debts

97ZJAppeals in relation to personal liability notices

97ZKWithdrawal of personal liability notices

97ZLRecovery of sums due under personal liability notice: application of Part 6 of TMA

97ZMRepayment of surplus amounts

CHAPTER 4DEBTS OF MANAGED SERVICE COMPANIES

97AInterpretation of Chapter 4

97BRelevant PAYE debts of managed service companies

97CTransfer of debt of managed service company

97DTime limits for issue of transfer notices

97EContents of transfer notice

97FPayment of the specified amount

97HProcedure on appeals

97JWithdrawal of transfer notices

97KApplication of Part 6 of TMA

97LRepayment of surplus amounts

PART 4ASecurity for payment of PAYE

97MInterpretation

97NRequirement for security

97PPersons from whom security can be required

97QNotice of requirement

97RDate on which security is due

97SApplication for reduction in the value of security held

97TOutcome of application for reduction in the value of security held

97UOutcome of application for reduction in the value of security held: further provision

97WAppeals: further provision for cases which fall within regulation 97R(2)

PART 5EMPLOYERS

Special arrangements

98Multiple PAYE schemes

99Multiple PAYE schemes: election made for improper purpose ineffective

100Tips: special arrangements

Death of employer and succession

101Death of employer

102Succession to a business etc

103Death and succession

104Succession to a business: trade disputes

PART 6PAYE SETTLEMENT AGREEMENTS

Making and effect of PSA

105Inland Revenue and employer may make PSA

106Qualifying general earnings

107Effect of PSA

Payment of tax under PSA

108Calculation of tax payable under PSA

109Payment of tax and recovery proceedings

110Formal determination of tax payable by the employer

Form and commencement of PSA

112Commencement of PSA

Variation and cancellation of PSA

113Variation of PSA

114Cancellation of PSA

115Interest on unpaid tax

116Interest on overpaid tax

117Inspection of PSA records

PART 7SPECIAL CASES

CHAPTER 1COUNCILLORS' ALLOWANCES

118Interpretation of Chapter 1

119Councillor’s option to have tax deducted at basic rate

120Particulars that local council must record

121Regulations apply as if basic rate option were issue of code

CHAPTER 2RESERVE FORCES' PAY

122Interpretation of Chapter 2

123Application of other Parts

124Deduction of tax

125Determination by Inland Revenue

126Objection against deduction of tax

127Appeal to the tribunal

128Amended determinations

129Certificate of tax deducted

130Repayment to reservist during tax year

131Particulars that Ministry must record

132End of year certificate

133Other PAYE income of reservist

CHAPTER 2ASOCIAL SECURITY LUMP SUMS

133AInterpretation of Chapter 2A

133BApplication of other Parts

133CDetermination of Rate of Deduction

133DNotification by Recipient of Notice of Tax Rate

133ECertificate of tax deducted

133FRepayment to recipient during tax year

133GRecords and notices

133HOther PAYE income of recipient

CHAPTER 3HOLIDAY PAY FUNDS

134Interpretation of Chapter 3

135Application of other Parts

136Deduction of tax

137Certificate of tax deducted

138Repayment to recipient during tax year

139Particulars that fund must record

140Other PAYE income of recipient

CHAPTER 4DIRECT COLLECTION AND SPECIAL ARRANGEMENTS

141Direct collection and special arrangements

142Direct collection: employee to report payments

143Direct collection: employee to keep records

144Direct collection: payment

145Direct collection: return when relevant payments cease

146Direct collection: end of year return

147Direct collection: failure to pay

147ACircumstances in which payment of a lesser amount is to be treated as payment in full for the purposes of paragraph 6(2) of Schedule 56 to the Finance Act 2009

PART 8SOCIAL SECURITY BENEFITS

CHAPTER 1JOBSEEKER'S ALLOWANCE: NORMAL CASES

148Interpretation of Chapters 1 and 2

149Scope of Chapter 1

150Application of other regulations

151Obtaining the claimant’s Form P45

152Deductions working sheet for claimants awarded taxable jobseeker’s allowance

153Form P45: deductions working sheet and return

154No Form P45: deductions working sheet and return

155Claimant’s code etc to be used for calculations

156Recording the amount of taxable jobseeker’s allowance

157Obligations at end of tax year

158When an award ceases

159Cessation of award: Form P45U

160Notification of taxable jobseeker’s allowance adjustment

161Tax calculation

162No tax calculation required in certain cases

163Death of claimant

CHAPTER 2JOBSEEKER'S ALLOWANCE: SPECIAL CASES

165Scope of Chapter 2

166Jobseeker’s allowance paid directly to claimant

167Jobseeker’s allowance paid by employer

168Regulation 167 cases: application of other regulations

169When a Chapter 2 award ceases

170Information to be supplied at end of tax year

171Information to be supplied when an award of taxable jobseeker’s allowance ceases

172Adjustments of taxable jobseeker’s allowance

CHAPTER 3INCAPACITY BENEFIT

173Interpretation of Chapter 3

174Application of other regulations

175Emergency IB code to be used before claimant’s code issued

176Return in respect of all claimants to taxable incapacity benefit

177Further return required in certain cases

178Delivery of Form P45 to Department

179Determination of claimant’s code by Inland Revenue

180Death of claimant

CHAPTER 4INCOME SUPPORT

181Interpretation of Chapter 4

182Recording the amount of taxable income support

183Information to be supplied when an award of taxable income support ceases

184Adjustments of taxable income support

CHAPTER 5EMPLOYMENT AND SUPPORT ALLOWANCE

184AInterpretation of Chapter 5

184BApplication of other regulations

184CObtaining the claimant’s Form P45

184DDeductions working sheet for claimants awarded taxable employment and support allowance

184EForm P45: deductions working sheet and return

184FNo Form P45: deductions working sheet and return

184GReturn in respect of all claimants to taxable employment and support allowance

184HFurther return required in certain cases

184IObligations at the end of the year

184JAnnual return

184KWhen an award ceases

184LCessation of award: Form P45ESA

184MDeath of claimant

184NTax calculation

184ONo tax calculation required in certain cases

184PClaimant’s code etc to be used for calculations

184QNotification of taxable employment and support allowance

184RRecording the amount of taxable employment and support allowance

PART 9ASSESSMENT AND SELF-ASSESSMENT

185Adjusting total net tax deducted for purposes of sections 59A(1) and 59B(1) TMA

186Recovery: adjustment of employee’s code

187Repayment: adjustment of employee’s code

188Assessments other than self-assessments

CHAPTER 1ELECTRONIC COMMUNICATIONS: INTERPRETATION

189Meaning of electronic communications etc

190Specified date

191Large and medium sized employers

CHAPTER 2ELECTRONIC COMMUNICATIONS: GENERAL

192Whether information has been delivered electronically

193Proof of content of electronic delivery

194Proof of identity of person sending or receiving electronic delivery

195Information sent electronically on behalf of a person

196Proof of delivery of information sent electronically

197Proof of payment sent electronically

198Use of unauthorised method of electronic communications

CHAPTER 3ELECTRONIC PAYMENT BY LARGE EMPLOYERS

198ALarge employers

199Large employers required to make specified payments electronically

200E-payment notices and appeal

201Employer in default if specified payment not received by applicable due date

202Default notice and appeal

203Default surcharge

204Surcharge notice and appeal

CHAPTER 4MANDATORY USE OF ELECTRONIC COMMUNICATIONS : SPECIFIED INFORMATION

205Mandatory use of electronic communications

205AMandatory use of electronic communication for delivering specified information

205BGeneral provisions relating to this Chapter

206ARelevant annual return

207Specified information

208E-filing notice and appeals

209Standards of accuracy and completeness

210Penalty for failing to deliver... specified information

210APenalty: relevant annual return for the tax year ending 5th April 2010

210AAPenalty: forms P35 and P14

210BPenalty: form P45 (Part 1 or Part 3), P46 or P46 (Pen); tax years ending 5th April 2012 and 5th April 2013

210BAPenalty: form P45 (Part 1 or Part 3), P46 or P46(Pen); tax years ending 5th April 2014 and subsequent years

210CAppeals and interest

CHAPTER 4AMandatory use of electronic communications: real time returns of information about relevant payments of tax and associated matters

210DApplication of Chapter 4 to real time returns of information about relevant payments of tax and associated matters

CHAPTER 5METHODS OF PROVIDING INFORMATION ETC

211How information must or may be delivered by employers

212Modifications for electronic version of Form P46(Pen)

213How information may be delivered by Inland Revenue

214How information must be provided by employees

215Meaning of Form P45, P46 and P46(Pen)

216Service by post

PART 11SUPPLEMENTARY PROVISIONS

Miscellaneous appeals

217Appeals: supplementary provisions

Certificate that sum due and payment by cheque

218Certificate that sum due

219Payment by cheque

Transitional provisions, savings and revocations

220Transitional provisions, savings and revocations

SCHEDULE A1Real time returns

1The information specified in this Schedule is as follows.

2Information about the employer

3The employer’s PAYE reference.

4The employer’s accounts office reference.

5If applicable, an indication that this is the final return...

6If applicable, an indication that this is the final return...

7. . . . . . . . . ....

8Information about the employee

9The employee’s date of birth.

10The employee’s current gender.

11If known, the employee’s national insurance number.

12If the employee’s national insurance is not known, the employee’s...

13The number used by the employer to identify the employee...

14If the number used by the employer to identify the...

14AIf applicable, an indication that the payment to which the...

14BWhere the return relates to a payment within paragraph 14A,...

15Information about payments to the employee, etc

16The total payments to date in this employment.

17The total net tax deducted in relation to those payments....

18The employee’s pay frequency or an indication that payments are...

19The date of the payment the return relates to.

20The tax week number or tax month number in which...

21An indication of which of the following bands the number...

22The value of the payment the return relates to.

22AIf applicable, an indication that comprised within the payment is—...

22BIf applicable, an indication that comprised within the payment is...

22C(1) If applicable, an indication that comprised within the payment...

22DIf applicable, an indication that comprised within the payment is...

23The tax code operated on the payment the return relates...

24If applicable, an indication that the employee’s tax code is...

25The total net tax deducted from the payment the return...

26The value of any amount comprised within the payment made...

26AThe value of the amounts referred to in paragraph 26...

27If the employer is required by regulation 67CA(1)(a) (notifications of...

28If the employer is required by regulation 67CA(1)(a) to include...

29The value of the payment after allowable pension contributions within...

30The value, if any, of allowable pension contributions within the...

30AThe value of the contributions referred to in paragraph 30...

31The value, if any, of employee pension contributions other than...

31AThe value of the contributions referred to in paragraph 31...

32The value of any earnings for the purposes of the...

33In paragraphs 15 to 31, “payment” means the relevant payment...

34In paragraph 32, “total payment” means the relevant payment the...

34AIf applicable, an indication that during the period since the...

35Information on the commencement of employment

36The date on which the employment commenced or will commence....

37The employee’s address.

38If known, the employee’s passport number.

39An indication of which of the statements in paragraph 41...

40If the employee is a seconded expatriate, the information required...

41The statements in this paragraph are— (a) the employment is...

42An indication of whether the employee is a seconded expatriate...

43The statements in this paragraph are— (a) the employee intends...

44. . . . . . . . . ....

45Information on the cessation of employment

46If applicable, an indication that the payment to which the...

SCHEDULE 1TRANSITIONAL PROVISIONS AND SAVINGS

PART 1GENERAL PROVISIONS

1Continuity of the law

2Paragraph 1 does not apply to any change in the...

3Anything which— (a) has been done, or has effect as...

4Any reference (express or implied) in these Regulations or any...

5Any reference (express or implied) in these Regulations to relevant...

6Any reference (express or implied) in these Regulations to—

7Any reference (express or implied) in these Regulations to general...

8Paragraphs 4, 5, 6 and 7 apply only in so...

9Paragraph 5 is without prejudice to the generality of paragraph...

10These Regulations have effect in relation to tax liable, under...

11Paragraph 10 is without prejudice to the generality of paragraphs...

12Paragraphs 1 to 11 have effect instead of paragraph (b)...

13General saving for old savings

14Interpretation

PART 2SPECIFIC PROVISIONS

15Modification of reference to payment to the Inland Revenue in regulation 68(2)

16FPCS information for the tax year ending 5th April 2002: employees not covered by regulation 46(1) of 1993 Regulations

17FPCS information for the tax year ending 5th April 2002: employees covered by regulation 46(1) of 1993 Regulations

18Due date for payments of tax in respect of tax periods ending before 6th April 2004

19Interest on unpaid tax: disapplication of regulation 82 for tax years before the tax year ending 5th April 1993

20Interest on unpaid tax: provisions applying to tax years before the tax year ending 5th April 1993

21Interest on tax overdue: application of regulation 82 to tax years from 1992-93 to 2003-04

22Interest on overpaid tax: disapplication of regulation 83 for tax years before the tax year ending 5th April 1997

23Interest on overpaid tax: provisions applying to tax years from 1992-93 to 1995-96

24Overpayments and underpayments of tax: tax years before the tax year ending 5th April 1997

25Overpayments and underpayments of tax: tax years before the tax year ending 5th April 2002

26Attribution of repayments: tax years before the tax year ending 5th April 1997

27Certificate that sum due: certificate of the collector

28Interpretation

SCHEDULE 2REVOCATIONS

2003 No. 2682

INCOME TAX

The Income Tax (Pay As You Earn) Regulations 2003

Made21st October 2003

Laid before the House of Commons30th October 2003

Coming into force6th April 2004

The Commissioners of Inland Revenue in exercise of the powers conferred on them by sections 684, 685(4), 692, 704, 705, 706, 707, 708 and 710 of the Income Tax (Earnings and Pensions) Act 20031, sections 59A(10), 59B(8), 98A and 113(1) of the Taxes Management Act 19702, sections 132 and 133(2) of the Finance Act 19993, section 136 of the Finance Act 20024, and sections 145(4) and 205 of the Finance Act 20035, hereby make the following Regulations:C1

Annotations:

Modifications etc. (not altering text)

C1

Regulations applied (with modifications) (with application in accordance with reg. 1(5) of the amending S.I.) by The Education (Postgraduate Master's Degree Loans) Regulations 2016 (S.I. 2016/606), regs. 1(1), 87 (with reg. 1(4))