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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Part 1 — Overview

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A

Bill

To

Restate, with minor changes, certain enactments relating to income tax on

employment income, pension income and social security income; and for

connected purposes. 

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and

consent of the Lords Spiritual and Temporal, and Commons, in this present

Parliament assembled, and by the authority of the same, as follows:—

Part 1

Overview

 1     Overview of contents of this Act

     (1)    This Act imposes charges to income tax on—

           (a)           employment income (see Parts 2 to 7),

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           (b)           pension income (see Part 9), and

           (c)           social security income (see Part 10).

     (2)    Those charges to tax have effect for the purposes of section 1(1) of ICTA (the

general charge to income tax).

     (3)    This Act also—

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           (a)           confers certain reliefs in respect of liabilities of former employees (see

Part 8),

           (b)           provides for the assessment, collection and recovery of income tax in

respect of employment, pension or social security income that is PAYE

income (see Part 11), and

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           (c)           allows deductions to be made from such income in respect of payroll

giving (see Part 12).

 2     Abbreviations and defined expressions

     (1)    Schedule 1 (abbreviations and defined expressions) applies for the purposes of

this Act.

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HL Bill 3353/2
 
 

Income Tax (Earnings and Pensions) Bill
Part 2 — Employment income: charge to tax
Chapter 1 — Introduction

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     (2)    In Schedule 1

           (a)           Part 1 gives the meaning of the abbreviated references to Acts and

instruments used in this Act, and

           (b)           Part 2 lists the places where expressions used in this Act are defined or

otherwise explained.

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     (3)    Part 2 of Schedule 1 does not apply to expressions used in Chapters 6 to 9 of

Part 7 (share incentive plans and other arrangements for acquiring shares):

separate indexes relating to these Chapters appear at the end of Schedules 2 to

5.

Part 2

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Employment income: charge to tax

Chapter 1

Introduction

 3     Structure of employment income Parts

     (1)    The structure of the employment income Parts is as follows—

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                    this Part imposes the charge to tax on employment income, and sets out—

                  (a)                 how the amount charged to tax for a tax year is to be calculated,

and

                  (b)                 who is liable for the tax charged;

                    Part 3 sets out what are earnings and provides for amounts to be treated

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as earnings;

                    Part 4 deals with exemptions from the charge to tax under this Part (and,

in some cases, from other charges to tax);

                    Part 5 deals with deductions from taxable earnings;

                    Part 6 deals with employment income other than earnings or share-

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related income; and

                    Part 7 deals with share-related income and exemptions.

     (2)    In this Act “the employment income Parts” means this Part and Parts 3 to 7.

 4      “Employment” for the purposes of the employment income Parts

     (1)    In the employment income Parts “employment” includes in particular—

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           (a)           any employment under a contract of service,

           (b)           any employment under a contract of apprenticeship, and

           (c)           any employment in the service of the Crown.

     (2)    In those Parts “employed”, “employee” and “employer” have corresponding

meanings.

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 5     Application to offices and office-holders

     (1)    The provisions of the employment income Parts that are expressed to apply to

employments apply equally to offices, unless otherwise indicated.

     (2)    In those provisions as they apply to an office—

           (a)           references to being employed are to being the holder of the office;

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Income Tax (Earnings and Pensions) Bill
Part 2 — Employment income: charge to tax
Chapter 2 — Tax on employment income

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           (b)           “employee” means the office-holder;

           (c)           “employer” means the person under whom the office-holder holds

office.

     (3)    In the employment income Parts “office” includes in particular any position

which has an existence independent of the person who holds it and may be

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filled by successive holders.

Chapter 2

Tax on employment income

 6     Nature of charge to tax on employment income

     (1)    The charge to tax on employment income under this Part is a charge to tax on—

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           (a)           general earnings, and

           (b)           specific employment income.

            The meaning of “employment income”, “general earnings” and “specific

employment income” is given in section 7.

     (2)    The amount of general earnings or specific employment income which is

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charged to tax in a particular tax year is set out in section 9.

     (3)    The rules in Chapters 4 and 5 of this Part, which are concerned with—

           (a)           the residence and domicile of an employee in a tax year, and

           (b)           the tax year in which amounts are received or remitted to the United

Kingdom,

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            apply for the purposes of the charge to tax on general earnings but not that on

specific employment income.

     (4)    The person who is liable for any tax charged on employment income is set out

in section 13.

     (5)    Employment income is not charged to tax under this Part if it is within the

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charge to tax under Case I of Schedule D by virtue of section 314(1) of ICTA

(divers and diving supervisors).

 7     Meaning of “employment income”, “general earnings” and “specific

employment income”

     (1)    This section gives the meaning for the purposes of the Tax Acts of

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“employment income”, “general earnings” and “specific employment income”.

     (2)    “Employment income” means—

           (a)           earnings within Chapter 1 of Part 3,

           (b)           any amount treated as earnings (see subsection (5)), or

           (c)           any amount which counts as employment income (see subsection (6)).

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     (3)    “General earnings” means—

           (a)           earnings within Chapter 1 of Part 3, or

           (b)           any amount treated as earnings (see subsection (5)),

            excluding in each case any exempt income.

     (4)    “Specific employment income” means any amount which counts as

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employment income (see subsection (6)), excluding any exempt income.

 

 

Income Tax (Earnings and Pensions) Bill
Part 2 — Employment income: charge to tax
Chapter 3 — Operation of tax charge

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     (5)    Subsection (2)(b) or (3)(b) refers to any amount treated as earnings under—

           (a)           Chapters 7 and 8 of this Part (application of provisions to agency

workers and workers under arrangements made by intermediaries),

           (b)           Chapters 2 to 11 of Part 3 (the benefits code),

           (c)           Chapter 12 of Part 3 (payments treated as earnings), or

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           (d)           section 262 of CAA 2001 (balancing charges to be given effect by

treating them as earnings).

     (6)    Subsection (2)(c) or (4) refers to any amount which counts as employment

income by virtue of—

           (a)           Part 6 (income which is not earnings or share-related),

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           (b)           Part 7 (share-related income and exemptions), or

           (c)           any other enactment.

 8     Meaning of “exempt income”

For the purposes of the employment income Parts, an amount of employment

income within paragraph (a), (b) or (c) of section 7(2) is “exempt income” if, as

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a result of any exemption in Part 4 or elsewhere, no liability to income tax arises

in respect of it as such an amount.

Chapter 3

Operation of tax charge

 9     Amount of employment income charged to tax

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     (1)    The amount of employment income which is charged to tax under this Part for

a particular tax year is as follows.

     (2)    In the case of general earnings, the amount charged is the net taxable earnings

from an employment in the year.

     (3)    That amount is calculated under section 11 by reference to any taxable earnings

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from the employment in the year (see section 10(2)).

     (4)    In the case of specific employment income, the amount charged is the net

taxable specific income from an employment for the year.

     (5)    That amount is calculated under section 12 by reference to any taxable specific

income from the employment for the year (see section 10(3)).

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     (6)    Accordingly, no amount of employment income is charged to tax under this

Part for a particular tax year unless—

           (a)           in the case of general earnings, they are taxable earnings from an

employment in that year, or

           (b)           in the case of specific employment income, it is taxable specific income

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from an employment for that year.

 10    Meaning of “taxable earnings” and “taxable specific income”

     (1)    This section explains what is meant by “taxable earnings” and “taxable specific

income” in the employment income Parts.

 

 

Income Tax (Earnings and Pensions) Bill
Part 2 — Employment income: charge to tax
Chapter 3 — Operation of tax charge

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     (2)    “Taxable earnings” from an employment in a tax year are to be determined in

accordance with—

           (a)           Chapter 4 of this Part (rules applying to employees resident, ordinarily

resident and domiciled in the UK), or

           (b)           Chapter 5 of this Part (rules applying to employees resident, ordinarily

5

resident or domiciled outside the UK).

     (3)    “Taxable specific income” from an employment for a tax year means the full

amount of any specific employment income which, by virtue of Part 6 or 7 or

any other enactment, counts as employment income for that year in respect of

the employment.

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 11    Calculation of “net taxable earnings”

     (1)    For the purposes of this Part the “net taxable earnings” from an employment in

a tax year are given by the formula—equation: plus[times[char[T],char[E]],minus[times[char[D],char[E]]]]

            where—

                      TE means the total amount of any taxable earnings from the employment

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in the tax year, and

                      DE means the total amount of any deductions allowed from those

earnings under provisions listed in section 327(3) to (5) (deductions

from earnings: general).

     (2)    If the amount calculated under subsection (1) is negative, the net taxable

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earnings from the employment in the year are to be taken to be nil instead.

     (3)    Relief may be available under section 380(1) of ICTA (set-off against general

income) —

           (a)           where TE is negative, or

           (b)           in certain exceptional cases where the amount calculated under

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subsection (1) is negative.

     (4)    If a person has more than one employment in a tax year, the calculation under

subsection (1) must be carried out in relation to each of the employments.

 12    Calculation of “net taxable specific income”

     (1)    For the purposes of this Part the “net taxable specific income” from an

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employment for a tax year is given by the formula—equation: plus[times[char[T],char[S],char[I]],minus[times[char[D],char[S],char[I]]]]

            where—

                    TSI means the amount of any taxable specific income from the

employment for the tax year, and

                    DSI means the total amount of any deductions allowed from that income

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under provisions of the Tax Acts not included in the lists in section 327

(3) and (4) (deductions from earnings: general).

     (2)    If the amount calculated under subsection (1) is negative, the net taxable

specific income from the employment for the year is to be taken to be nil

instead.

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Income Tax (Earnings and Pensions) Bill
Part 2 — Employment income: charge to tax
Chapter 4 — Taxable earnings: rules applying to employee resident, ordinarily resident and domiciled in UK

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     (3)    If a person has more than one kind of specific employment income from an

employment for a tax year, the calculation under subsection (1) must be carried

out in relation to each of those kinds of specific employment income; and in

such a case the “net taxable specific income” from the employment for that year

is the total of all the amounts so calculated.

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 13    Person liable for tax

     (1)    The person liable for any tax on employment income under this Part is the

taxable person mentioned in subsection (2) or (3).

            This is subject to subsection (4).

     (2)    If the tax is on general earnings, “the taxable person” is the person to whose

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employment the earnings relate.

     (3)    If the tax is on specific employment income, “the taxable person” is the person

in relation to whom the income is, by virtue of Part 6 or 7 or any other

enactment, to count as employment income.

     (4)    If the tax is on general earnings received, or remitted to the United Kingdom,

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after the death of the person to whose employment the earnings relate, the

person’s personal representatives are liable for the tax.

     (5)    In that event the tax is accordingly to be assessed on the personal

representatives and is a debt due from and payable out of the estate.

Chapter 4

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Taxable earnings: rules applying to employee resident, ordinarily resident and

domiciled in UK

Taxable earnings

 14    Taxable earnings under this Chapter: introduction

     (1)    This Chapter sets out for the purposes of this Part what are taxable earnings

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from an employment in a tax year in cases where section 15 (earnings for year

when employee resident, ordinarily resident and domiciled in UK) applies to

general earnings for a tax year.

     (2)    In this Chapter—

           (a)           sections 16 and 17 deal with the year for which general earnings are

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earned, and

           (b)           sections 18 and 19 deal with the time when general earnings are

received.

     (3)    In the employment income Parts any reference to the charging provisions of

this Chapter is a reference to section 15.

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