The Income Tax (Pay As You Earn) Regulations 2003

CHAPTER 4 U.K. DIRECT COLLECTION AND SPECIAL ARRANGEMENTS

Direct collection and special arrangements U.K.

141.— [F1 (1) In any case in which HMRC are of the opinion that deduction of tax by reference to the tax tables is impracticable, the direct collection procedure in regulation 142 applies to any PAYE income, unless HMRC makes special arrangements for the collection of tax in respect of that PAYE income.]

(2) A special arrangement does not apply to PAYE income of an employer’s employees if—

(a) the arrangement has not been agreed with the employer, and

(b) the employer does not proceed in accordance with the arrangement.

[F2 (3) A special arrangement must be—

(a) in writing, and

(b) signed and dated by the employer and HMRC.

(4) A special arrangement must specify—

(a) the date by which the return under paragraph (8) must be delivered, which must be no later than 31st May following the end of each tax year to which the special arrangement relates, and

(b) the due date for the payment of tax under paragraph (5).

(5) The employer must pay to HMRC by the due date the tax payable in relation to the preceding tax year in respect of the PAYE income to which a special arrangement applies.

(6) PAYE income to which a special arrangement applies is not to be included—

(a) in a return by the employer under regulation 67B, 67D, 67E, 73, 74 or 75 (returns of relevant payments and tax deducted), nor

(b) in particulars provided by the employer under regulation 85 (annual return of other earnings (Form P11D)).

(7) Following the end of the tax year, the employer must deliver to HMRC the information specified in Schedule A1 (real time returns) in respect of the PAYE income to which a special arrangement applied for that tax year.

(8) The information must be included in a return which must be delivered by the date specified in the special arrangement.

(9) The return must be made using an approved method of electronic communications.

(10) In paragraph (3) “in writing” includes electronic communications and “signed” includes electronic signatures.

(11) In paragraphs (4) and (5) “the due date” means the date specified in the special arrangement which must be no later than 31st May following the end of each tax year to which the special arrangement relates.]

Textual Amendments

F1 Reg. 141(1) substituted (6.4.2020) by The Income Tax (Pay As You Earn) (Amendment) Regulations 2020 (S.I. 2020/88), regs. 1, 2(2)

F2 Reg. 141(3)-(11) inserted (6.4.2020) by The Income Tax (Pay As You Earn) (Amendment) Regulations 2020 (S.I. 2020/88), regs. 1, 2(3)

[F3 Direct collection: employee to report payments U.K.

142.— (1) On receiving a relevant payment—

(a) an employee (E) must proceed in accordance with paragraph (3) or paragraph (4), as the case may be, and

(b) regulations 143 to 147A (direct collection) apply to E,

unless E objects to the application of the direct collection procedure.

(2) E may, within 30 days beginning with the date of receipt of written notification from HMRC that the direct collection procedure applies, object by written notice to HMRC to that procedure.

(3) E must deliver the information specified in Schedule A1 as if E were a Real Time Information employer for the purposes of regulations 67B (real time information returns of information about relevant payments), 67E (returns under regulations 67B and 67D: amendments), 67EA (failure to make a return under regulation 67B or 67D) and 67F (additional information about payments) and references to “an employer making a relevant payment” are to be read as if they were references to “the employee receiving a relevant payment”.

(4) But if E—

(a) is an individual who is a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications, or

(b) has been given a direction under paragraph (5),

E may instead proceed as if E were a Real Time Information employer to whom regulations 67D (exceptions to regulation 67B), 67E (returns under regulations 67B and 67D: amendments), 67EA (failure to make a return under regulation 67B or 67D) and 67F (additional information about payments) apply with the modification referred to in paragraph (3).

(5) Where the Commissioners for Her Majesty’s Revenue are satisfied that—

(a) it is not reasonably practicable for E to make a return using an approved form of electronic communication, and

(b) it is E who delivers the return (and not some other person on E’s behalf),

they may make a direction specifying that E is not required to make a return using an approved method of electronic communication.]

Textual Amendments

F3 Reg. 142 substituted (6.4.2014) by The Income Tax (Pay As You Earn) and the Income Tax (Construction Industry Scheme) (Amendment) Regulations 2014 (S.I. 2014/472), regs. 1(2), 11

Direct collection: employee to keep records U.K.

143.—(1) Whenever the employee receives any relevant payment during the tax year, the employee must record in [F4 a deductions] working sheet—

(a) the amount of the payment,

(b) the date on which it was received, and

(c) the total payments to date.

(2) In addition, the employee must record in [F5 that deductions] working sheet in relation to the last date in a tax quarter on which the employee receives a relevant payment—

(a) the total free pay to date or, as the case may be, the total additional pay to date in relation to that date according to the employee’s code, and

(b) the corresponding total tax to date.

(3) If the employee does not receive any relevant payments in a tax quarter, the last day of the quarter must be used for the purposes of paragraph (2).

(4) If the employee receives relevant payments in more than one capacity, no account is to be taken for the purposes of this regulation and regulations 144 to 147 of the relevant payments received by the employee in any capacity other than that mentioned in [F6 that deductions] working sheet.

(5) In this regulation ..., “total payments to date” means, in relation to any date, the sum of all relevant payments received by the employee from the beginning of the tax year up to and including that date, irrespective of the person or persons from whom it was received.

Textual Amendments

F4 Words in reg. 143(1) substituted (6.4.2014) by The Income Tax (Pay As You Earn) and the Income Tax (Construction Industry Scheme) (Amendment) Regulations 2014 (S.I. 2014/472), regs. 1(2), 12(a)

F5 Words in reg. 143(2) substituted (6.4.2014) by The Income Tax (Pay As You Earn) and the Income Tax (Construction Industry Scheme) (Amendment) Regulations 2014 (S.I. 2014/472), regs. 1(2), 12(b)

F6 Words in reg. 143(4) substituted (6.4.2014) by The Income Tax (Pay As You Earn) and the Income Tax (Construction Industry Scheme) (Amendment) Regulations 2014 (S.I. 2014/472), regs. 1(2), 12(b)

Direct collection: payment U.K.

144.—(1) In this regulation—

[F7 “the current total tax” means the amount required to be recorded at paragraph 17 of Schedule A1 (real time returns) in the most recent return which the employee is required to make in the tax year, or where the employee is required to make a return under regulation 67EA(3) (failure to make a return under regulation 67B), the amount required to be recorded at paragraph 17 of Schedule A1 for the tax year to which that return relates;]

“the previous total tax” means the total tax to date (if any) required to be recorded for the previous tax quarter in the tax year.

(2) If, in relation to any tax quarter, the current total tax exceeds the previous total tax, the employee must pay the excess to the Inland Revenue, within 14 days after the end of the tax quarter.

(3) But if, in relation to any tax quarter, the previous total tax exceeds the current total tax, the employee may recover the excess—

(a) by deducting it from the amount payable under paragraph (2) for a later quarter in the tax year, or

(b) from the Board of Inland Revenue.

(4) ... The amount payable under paragraph (2) is not to exceed the overriding limit in relation to the relevant payments which the employee has received in that tax quarter.

(5) Any amount which is not payable because of the application of paragraph (4) must be added to the current total tax for the purpose of the calculation in paragraph (2) or (3) for the next tax quarter (if any) of that tax year.

Textual Amendments

F7 Words in reg. 144(1) substituted (6.4.2014) by The Income Tax (Pay As You Earn) and the Income Tax (Construction Industry Scheme) (Amendment) Regulations 2014 (S.I. 2014/472), regs. 1(2), 14

Direct collection: return when relevant payments cease U.K.

145.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Direct collection: end of year return U.K.

146.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Direct collection: failure to pay U.K.

147.—(1) This regulation applies if, within 14 days after the end of any tax quarter—

(a) the employee has not paid any tax for that quarter, and the Inland Revenue are unaware of the amount, if any, which the employee is liable to pay for that quarter, or

(b) the employee has paid an amount of tax for that quarter, but the Inland Revenue are not satisfied that it is the full amount which the employee is liable to pay for that quarter.

(2) The Inland Revenue may give notice to the employee requiring the employee, within 14 days of the issue of the notice, to deliver a return showing the amount of tax which the employee is liable to pay under regulation 144(2) in respect of the tax quarter in question.

(3) If such a notice is given, regulations 77, 84 and 218(5) and (6) (which relate to the certification and recovery of tax unpaid by an employer) apply with the necessary modifications for the purposes of ascertaining, certifying and recovering the tax payable by the employee as if it were tax which the employee was liable to deduct from relevant payments paid by the employee.

[F8 Circumstances 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 U.K.

147A.— (1) A payment that is less than the full amount due under regulation 67G(2) (payments to and recoveries from HMRC for each tax period), as adjusted by regulation 67H (payments due and recoveries from HMRC for each tax period: returns under regulation 67E(6)) where appropriate, will for the purposes of paragraph 6(2) of Schedule 56 to the Finance Act 2009 (amount of penalty: PAYE and CIS) be treated as payment of the full amount if the difference between the full amount and the amount paid is no more than £100 (“the tolerance”), but this is subject to paragraphs (2) and (3).

(2) Paragraph (1) does not apply where—

(a) the payment relates to a return which corrects information given in a return filed in respect of a relevant payment made in an earlier tax month, and

(b) the return is delivered after 19th April following the end of the tax year in question.

(3) If the total sum paid by the employer to HMRC for the tax period includes not only the amount due under regulation 67G(2), as adjusted by regulation 67H where appropriate, but also one or more of—

(a) any earnings-related contributions (as defined by regulation 1(2) of the SSC Regulations 2001),

(b) any payment under regulation 7(1) of the Income Tax (Construction Industry Scheme) Regulations 2005, or

(c) any repayment due under the Student Loans Regulations,

the tolerance is applied to the total sum paid to HMRC for the tax period to which the payments relate.]

Textual Amendments

F8 Reg. 147A inserted (with effect in accordance with reg. 1(4) of the amending S.I.) by The Income Tax (Pay As You Earn) and the Income Tax (Construction Industry Scheme) (Amendment) Regulations 2014 (S.I. 2014/472), regs. 1(2), 17