PART 2CODES
Determination of code
Determination of code by Inland RevenueI313
The Inland Revenue must determine the code for use by an employer in respect of an employee for a tax year.
Matters relevant to determination of codeI514
1
If the Inland Revenue determine a code under this regulation, they must have regard to the following matters so far as known to them—
a
the reliefs from income tax to which the employee is entitled for the tax year in which the code is determined, so far as the employee’s title to those reliefs has been established at the time of the determination;
b
any PAYE income of the employee (other than the relevant payments in relation to which the code is being determined);
c
any tax overpaid for any previous tax year which has not been repaid;
d
any tax remaining unpaid for any previous tax year which is not otherwise recovered;
e
any tax repaid to the employee in excess of the amount properly due to the employee which may be recovered as if it were unpaid tax under section 30(1) of TMA22 (recovery of overpayment of tax etc) and which is not otherwise recovered;
f
unless the employee objects, any other income of the employee which is not PAYE income; and
g
such other adjustments as may be necessary to secure that, so far as possible, the tax in respect of the employee’s income in relation to which the code is determined will be deducted from the relevant payments made during that tax year.
2
If the Inland Revenue determine the code before the beginning of the tax year for which it is determined, the Inland Revenue—
a
must have regard to any expected change in the amount of any relief referred to in paragraph (1)(a), but
b
may disregard any such relief if they are not satisfied that the employee will be entitled to it for the tax year for which the code is determined.
3
Paragraphs (1)(c) and (d) are subject to regulations 186 and 187 (recovery and repayment: adjustment of employee’s code).
Flat rate codesI815
F6A1
HMRC may determine that the code for use by an employer in respect of an employee for a tax year is the additional rate code, if they have reason to believe that the employee will be chargeable at the additional rate on all or a substantial part of the employee’s relevant payments.
1
The Inland Revenue may determine that the code for use by an employer in respect of an employee for a tax year is the higher rate code, if they have reason to believe that the employee will be chargeable at the higher rate on all or a substantial part of the employee’s relevant payments.
2
The Inland Revenue may determine that the code for use by an employer in respect of an employee for a tax year is the basic rate code, if they have reason to believe that the employee will be chargeable at the basic rate on all or a substantial part of the employee’s relevant payments.
3
The Inland Revenue may determine that the code for use by an employer in respect of an employee for a tax year is the nil tax code, if—
a
the employee’s PAYE income will be taken into account as taxable income other than PAYE income in any assessment,
b
the Inland Revenue are not satisfied that the employee’s income will be chargeable, or
c
the Inland Revenue have reason to believe that the employee will be entitled to a deduction under Chapter 6 of Part 5 of ITEPA (deductions from seafarers' earnings) in respect of the employee’s PAYE income or so much of it as remains after any deductions under F5sections 188 to 195 of the Finance Act 2004 (members' contributions).
4
References in this regulation to an employee’s relevant payments, PAYE income and income are references to the payments or income in respect of which the employee’s code is being determined for the purposes of the employment in question.
Continued application of employee’s codeI116
1
If the Inland Revenue determine that the code for use by an employer in respect of an employee for a tax year remains the same as at the previous 5th April, the Inland Revenue need not issue a code to the employer.
2
If for any tax year the employer does not receive a code for an employee who was in that employer’s employment on the previous 5th April, the code which applied on that date is treated as having been issued by the Inland Revenue for the tax year in question.
Notice to employee of codeI717
1
The Inland Revenue must give notice to an employee of the code which they have determined for use in respect of that employee for any tax year.
2
But notice need not be given if—
a
the code for use in respect of the employee remains the same as at the previous 5th April; or
b
the change in the code is solely because of an alteration or proposed alteration in the rates of any of the personal reliefs allowable under sections 257 and 257A of ICTA24 (personal allowance and married couple’s allowance) or in the tax tables.
Appeals and amendment
Objections and appeals against employee’s codeI218
1
An employee who objects to the determination of a code must state the grounds of objection.
2
On receiving the notice of objection the Inland Revenue may amend the determination of the code by agreement with the employee.
3
If the Inland Revenue and employee do not reach agreement, the employee may appeal F4... against the determination of the code by giving notice to the Inland Revenue.
4
F3On an appeal that is notified to the tribunal, the tribunal must determine the code in accordance with these Regulations.
F25
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amendment of codeI419
1
Paragraph (2) applies if the code for use by an employer in respect of an employee is found to be inappropriate because the actual circumstances are different from the circumstances by reference to which it was determined, whether by the Inland Revenue or the F1tribunal.
2
The Inland Revenue may, and if required by the employee must, amend the code by reference to the actual circumstances.
3
The Inland Revenue must give notice of the amended code to the employee by the date on which the notice under regulation 20(1) is issued to the employer.
4
But notice need not be given where the change in the code is solely because of an alteration or proposed alteration in the rates of any of the personal reliefs allowable under sections 257 and 257A of ICTA (personal allowance and married couple’s allowance) or in the tax tables.
5
Regulation 18 (objections and appeals) applies in relation to the amended code as it applies in relation to the original code.
6
Regulation 18 also applies if the Inland Revenue do not agree that the circumstances have changed and so refuse to amend the code in accordance with paragraph (2).
Notice to employer of amended codeI620
1
If the code for use by an employer in respect of an employee is amended after notice of it has been issued to the employer, the Inland Revenue must issue the amended code to the employer.
2
An amended code is issued to an employer if it is contained in a document that is sent to the employer or a person acting on behalf of the employer by the Inland Revenue, and any code so issued is received by the employer for the purposes of these Regulations.
3
On making any subsequent relevant payment to the employee, the employer must deduct or repay tax by reference to the amended code.
4
Paragraphs (5) and (6) apply if there is a change or proposed change in the rates of any of the personal reliefs allowable under sections 257 and 257A of ICTA (personal allowance and married couple’s allowance).
5
If the change or proposed change relates to the current tax year, the Inland Revenue may give notice requiring the employer, with effect from the date specified in the notice, to amend specified codes as directed.
6
If the change relates to the following tax year, the Inland Revenue may give notice requiring the employer to carry forward to the following tax year specified codes of the current tax year and adjust them as directed in the notice.
7
A code which has—
a
been amended by virtue of paragraph (5) in respect of the current tax year, or
b
been carried forward to the following tax year and adjusted by virtue of paragraph (6),
is treated as having been determined and issued by the Inland Revenue as the employee’s code for that tax year.
8
A notice under paragraphs (5) and (6) may be issued to the employer or to a person acting on behalf of the employer.