The Income Tax (Pay As You Earn) (Amendment) Regulations 2006

Explanatory Note

(This note is not part of the Regulations)

These Regulations amend the Income Tax (Pay As You Earn) Regulations 2003 (S.I. 2003/2682) (“the PAYE Regulations”). The amendments follow on from the introduction of a charge to income tax when a person becomes entitled to a social security pension lump sum (“a lump sum”) provided for in section 7 of the Finance (No.2) Act 2005.

Regulation 1 provides for the citation and commencement of these Regulations and defines certain terms contained in them.

Regulation 2 inserts a new Chapter 2A into the PAYE Regulations entitled “Social Security Lump Sums”.

The new regulation 133A provides for interpretation of the terms used in the chapter.

The inserted regulation 133B provides that parts 2 and 3 of the PAYE Regulations do not apply to a lump sum but that the remainder of the PAYE Regulations apply as if a basic rate code had been issued in respect of the lump sum.

The new regulations 133C and D provide for the determination of the rate of income tax to be deducted from the payment of the lump sum which will either be the rate notified to the Department by the recipient of the lump sum, or in the absence of any such notification, the basic rate.

The new regulation 133E provides for the Department to issue a certificate containing certain details of the deduction.

The new regulation 133F provides that the Department may repay any overpayment of income tax in respect of the lump sum. if the wrong amount has been deducted due to an administrative error by the Department.

The new regulation 133G provides for the maintenance of records by the Department and the notification of any payments to an officer of Revenue and Customs. The new regulation 133H provides that nothing in the inserted Chapter shall affect the application of the PAYE Regulations in respect of any other PAYE income of the recipient.

These Regulations do not impose any new costs on business.