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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 2 — PAYE: General

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 683   PAYE income

     (1)    For the purposes of this Act and any other enactment (whenever passed)

“PAYE income” for a tax year consists of—

           (a)           any PAYE employment income for the year,

           (b)           any PAYE pension income for the year, and

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           (c)           any PAYE social security income for the year.

     (2)    “PAYE employment income” for a tax year means income which consists of—

           (a)           any taxable earnings from an employment in the year (determined in

accordance with section 10(2)), and

           (b)           any taxable specific income from an employment for the year

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(determined in accordance with section 10(3)).

     (3)    “PAYE pension income” for a tax year means, subject to subsection (4), taxable

pension income for the year determined in accordance with any of the

following provisions—

                    section 571 (United Kingdom pensions),

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                    section 578 (United Kingdom social security pensions),

                    section 581 (approved retirement benefits schemes: pensions and

annuities),

                    section 584 (approved retirement benefits schemes: unauthorised

payments),

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                    section 591 (former approved superannuation funds: annuities),

                    section 596 (approved personal pension schemes: annuities),

                    section 599 (approved personal pension schemes: income withdrawals)

                    section 602 (approved personal pension schemes: unauthorised

payments)

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                    section 616 (certain overseas government pensions paid in the United

Kingdom),

                    section 621 (the House of Commons Members’ Fund),

                    section 634 (voluntary annual payments).

     (4)    “PAYE pension income” does not include any taxable pension income

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determined in accordance with section 584 that would not be such income if

section 587 (marine pilots’ benefit fund) were omitted.

     (5)    “PAYE social security income” for a tax year means taxable social security

income for the year determined in accordance with section 658(4) or (5)

(taxable United Kingdom social security benefits).

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Chapter 2

PAYE: General

 684   PAYE regulations

     (1)    The Board of Inland Revenue must make regulations (“PAYE regulations”)

with respect to the assessment, charge, collection and recovery of income tax in

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respect of all PAYE income.

     (2)    PAYE regulations may, in particular, include any such provision as is set out

in the following list.

 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 2 — PAYE: General

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1.

Provision—

 
  

     (a)    for requiring persons making payments of, or on account of,

 
  

PAYE income to make, at the time of the payment, deductions

 
  

or repayments of income tax calculated by reference to tax

 
  

tables prepared by the Board of Inland Revenue, and

 

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     (b)    for making persons who are required to make any such

 
  

deductions or repayments accountable to or, as the case may

 
  

be, entitled to repayment from the Board.

 
 

2.

Provision for the collection and recovery, whether by deduction from

 
  

any PAYE income paid in any later year or otherwise, of income tax

 

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in respect of any such income which has not been deducted or

 
  

otherwise recovered during the year.

 
 

3.

Provision for the production to, and inspection by, persons

 
  

authorised by the Board of wages sheets and other documents and

 
  

records for the purposes of satisfying themselves that income tax has

 

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been and is being deducted, repaid and accounted for in accordance

 
  

with the regulations.

 
 

4.

Provision for requiring an employer or former employer to provide

 
  

any information, within a prescribed time, about payments or other

 
  

benefits provided or to be provided, including those provided or to

 

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be provided in connection with—

 
  

     (a)    the termination of a person’s employment, or

 
  

     (b)    a change in the duties of or general earnings from a person’s

 
  

employment.

 
 

5.

Provision for the way in which any matters provided for by the

 

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regulations are to be proved.

 
 

6.

Provision—

 
  

     (a)    for requiring the payment of interest on sums due to the

 
  

Board which are not paid by the due date,

 
  

     (b)    for determining the date (being not less than 14 days after the

 

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end of the tax year in respect of which the sums are due) from

 
  

which such interest is to be calculated, and

 
  

     (c)    for enabling the repayment or remission of such interest.

 
 

7.

Provision for requiring the payment of interest on sums due from the

 
  

Board and for determining the date from which such interest is to be

 

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calculated.

 
 

8.

Provision for the assessment and charge of income tax in respect of

 
  

PAYE income.

 
 

9.

Provision for appeals with respect to matters arising under the

 
  

regulations which would otherwise not be the subject of an appeal.

 

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10.

Different provision for different cases or classes of case.

 
 

11.

Any incidental, consequential, supplementary and transitional

 
  

provision which appears to the Board to be expedient.

 
 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 2 — PAYE: General

    320

 

     (3)    The deductions of income tax required to be made by PAYE regulations under

item 1 in the above list may be required to be made at the basic rate or other

rates in such cases or classes of case as may be provided by the regulations.

     (4)    Interest required to be paid by PAYE regulations under item 6 or 7 in the above

list must be paid without any deduction of income tax and may not be taken

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into account in computing any income, profits or losses for any tax purposes.

     (5)    PAYE regulations must not affect any right of appeal to the General or Special

Commissioners which a person would have apart from the regulations.

     (6)    It does not matter for the purposes of PAYE regulations that income is wholly

or partly income for a tax year other than that in which the payment is made.

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     (7)    PAYE regulations have effect despite anything in the Income Tax Acts.

     (8)    In this Act and any other enactment (whenever passed) “PAYE regulations”

means regulations under this section.

 685   Tax tables

     (1)    The Board of Inland Revenue must construct tax tables with a view to securing

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that so far as possible—

           (a)           the total income tax payable in respect of PAYE income for any tax year

is deducted from PAYE income paid during that year, and

           (b)           the income tax deductible or repayable on the occasion of any payment

of, or on account of, PAYE income is such that the following

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proportions are the same—

                  (i)                 the proportion which the total net income tax deducted since

the beginning of the tax year bears to the total income tax

payable for the year, and

                  (ii)                the proportion which the part of the tax year which ends with

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the date of the payment bears to the whole year.

     (2)    References in subsection (1) to the total income tax payable for the year are to

be read as references to the total income tax estimated to be payable for the year

in respect of the income in question—

           (a)           subject to a provisional deduction for allowances and reliefs, and

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           (b)           subject, if necessary, to an adjustment for amounts overpaid or

remaining unpaid on account of income tax in respect of PAYE income

for any previous year.

     (3)    For the purpose of estimating the total income tax payable as mentioned in

subsection (1)(a), it may be assumed, in relation to any payment of, or on

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account of, PAYE income, that the following proportions will be the same—

           (a)           the proportion which the income paid in the part of the tax year which

ends with the making of the payment bears to the income for the whole

year, and

           (b)           the proportion which that part of the tax year bears to the whole year.

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 686   Meaning of “payment”

     (1)    For the purposes of PAYE regulations, a payment of, or on account of, PAYE

income of a person is treated as made at the earliest of the following times—

            

 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 3 — PAYE: Special types of payer or payee

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            Rule 1

            The time when the payment is made.

            

            Rule 2

            The time when the person becomes entitled to the payment.

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            Rule 3

            If the person is a director of a company and the income is income from

employment with the company (whether or not as director), whichever is the

earliest of—

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           (a)           the time when sums on account of the income are credited in the

company’s accounts or records (whether or not there is any restriction

on the right to draw the sums);

           (b)           if the amount of the income for a period is determined before the period

ends, the time when the period ends;

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           (c)           if the amount of the income for a period is not determined until after

the period has ended, the time when the amount is determined.

     (2)    Rule 3 applies if the person is a director of the company at any time in the tax

year in which the time mentioned falls.

     (3)    In this section “director” means—

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           (a)           in relation to a company whose affairs are managed by a board of

directors or similar body, a member of that board or body,

           (b)           in relation to a company whose affairs are managed by a single director

or other person, that director or person, and

           (c)           in relation to a company whose affairs are managed by the members

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themselves, a member of the company,

            and includes any person in accordance with whose directions or instructions

the company’s directors (as defined above) are accustomed to act.

     (4)    For the purposes of subsection (3) a person is not regarded as a person in

accordance with whose directions or instructions the company’s directors are

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accustomed to act merely because the directors act on advice given by that

person in a professional capacity.

Chapter 3

PAYE: Special types of payer or payee

 687   Payments by intermediary

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     (1)    If any payment of, or on account of, PAYE income of an employee is made by

an intermediary of the employer, the employer is to be treated, for the purposes

of PAYE regulations, as making a payment of the income of an amount equal

to the amount given by subsection (3).

     (2)    Subsection (1) does not apply if the intermediary (whether or not a person to

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whom PAYE regulations apply) deducts income tax from the payment the

intermediary makes, and accounts for it, in accordance with PAYE regulations.

     (3)    The amount referred to is—

           (a)           if the amount of the payment made by the intermediary is an amount

to which the recipient is entitled after deduction of income tax, the

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Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 3 — PAYE: Special types of payer or payee

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           (a)           aggregate of the amount of the payment and the amount of any income

tax due, and

           (b)           in any other case, the amount of the payment.

     (4)    For the purposes of this section, a payment of, or on account of, PAYE income

of an employee is made by an intermediary of the employer if it is made—

5

           (a)           by a person acting on behalf of the employer and at the expense of the

employer or a person connected with the employer, or

           (b)           by trustees holding property for any persons who include or class of

persons which includes the employee.

 688   Agency workers

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     (1)    If the remuneration receivable by an individual under or in consequence of any

contract falls to be treated under section 44 (agency workers) as earnings from

an employment, the relevant provisions have effect as if the individual held the

employment with or under the agency.

     (2)    If—

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           (a)           the remuneration receivable by an individual under or in consequence

of any contract falls to be so treated under section 44, and

           (b)           a payment of, or on account of, PAYE income of the individual is made

by a person acting on behalf of the client, and at the expense of the client

or a person connected with the client,

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            section 687 and, in relation to any payment treated as made by the client under

section 687, section 710 have effect in relation to the payment as if the client and

not the agency were the employer for the purposes of the relevant provisions.

     (3)    In subsections (1) and (2)—

                    “the agency” and “the client” have the same meanings as in section 44;

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                    “the relevant provisions” means this Chapter except section 691, Chapter

4 of this Part and section 710.

 689   Employee of non-UK employer

     (1)    This section applies if—

           (a)           an employee during any period works for a person (“the relevant

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person”) who is not the employer of the employee;

           (b)           any payment of, or on account of, PAYE income of the employee in

respect of that period is made by a person who is the employer or an

intermediary of the employer or of the relevant person;

           (c)           PAYE regulations do not apply to the person making the payment or,

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if that person makes the payment as an intermediary of the employer

or of the relevant person, the employer; and

           (d)           income tax is not deducted, or not accounted for, in accordance with the

regulations by the person making the payment or, if that person makes

the payment as an intermediary of the employer or of the relevant

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person, the employer.

     (2)    The relevant person is to be treated, for the purposes of PAYE regulations, as

making a payment of PAYE income of the employee of an amount equal to the

amount given by subsection (3).

     (3)    The amount referred to is—

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Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 3 — PAYE: Special types of payer or payee

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           (a)           if the amount of the payment actually made is an amount to which the

recipient is entitled after deduction of income tax, the aggregate of the

amount of the payment and the amount of any income tax due, and

           (b)           in any other case, the amount of the payment.

     (4)    If, by virtue of any of sections 693 to 700, an employer would be treated for the

5

purposes of PAYE regulations (if they applied to the employer) as making a

payment of any amount to an employee, this section has effect as if—

           (a)           the employer were also to be treated for the purposes of this section as

making an actual payment of that amount, and

           (b)           paragraph (a) of subsection (3) were omitted.

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     (5)    For the purposes of this section, a payment of, or on account of, PAYE income

of an employee is made by an intermediary of the employer or of the relevant

person if it is made—

           (a)           by a person acting on behalf of the employer or the relevant person and

at the expense of the employer or the relevant person or a person

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connected with the employer or the relevant person, or

           (b)           by trustees holding property for any persons who include or class of

persons which includes the employee.

     (6)    In this section and sections 690 and 691 “work”, in relation to an employee,

means the performance of any duties of the employment of the employee and

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any reference to the employee’s working is to be read accordingly.

 690   Employee non-resident etc.

     (1)    This section applies in relation to an employee in a tax year only if the

employee—

           (a)           is not resident or, if resident, not ordinarily resident in the United

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Kingdom, and

           (b)           works or will work in the United Kingdom and also works or is likely

to work outside the United Kingdom.

     (2)    If in relation to an employee to whom this section applies and any tax year it

appears to the Inland Revenue that—

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           (a)           some of the income paid to the employee by the employer is PAYE

income, but

           (b)           some of that income may not be PAYE income,

            the Inland Revenue may, on an application made by the appropriate person,

give a direction for determining a proportion of any payment made in that year

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of, or on account of, income of the employee which is to be treated as PAYE

income.

     (3)    In this section—

           (a)           “the appropriate person” means the person designated by the employer

for the purposes of this section and, if no person is so designated, the

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employer, and

           (b)           any reference to a payment made by the employer includes a reference

to a payment made by a person acting on behalf of the employer and at

the expense of the employer or a person connected with the employer.

     (4)    An application under subsection (2) must provide such information as is

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available and is relevant to the application.

 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 3 — PAYE: Special types of payer or payee

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     (5)    A direction under subsection (2)—

           (a)           must specify the employee to whom and the tax year to which it relates,

           (b)           must be given by notice to the appropriate person, and

           (c)           may be withdrawn by notice to the appropriate person from a date

specified in the notice.

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     (6)    The date so specified may not be earlier than 30 days from the date on which

the notice of withdrawal is given.

     (7)    If—

           (a)           a direction under subsection (2) has effect in relation to an employee to

whom this section applies, and

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           (b)           a payment of, or on account of, the income of the employee is made by

the employer in the tax year to which the direction relates,

            the proportion of the payment determined in accordance with the direction is

to be treated for the purposes of PAYE regulations as a payment of PAYE

income of the employee.

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     (8)    If in any tax year—

           (a)           no direction under subsection (2) has effect in relation to an employee

to whom this section applies, and

           (b)           any payment of, or on account of, the income of the employee is made

by the employer,

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            the entire payment is to be treated for the purposes of PAYE regulations as a

payment of PAYE income of the employee.

     (9)    Subsections (7) and (8) are without prejudice to—

           (a)           any assessment in respect of the income of the employee in question,

and

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           (b)           any right to repayment of income tax overpaid and any obligation to

pay income tax underpaid.

     (10)   In a case where section 689 applies—

           (a)           the references to the employer in subsection (3)(a) are to be read as

references to the relevant person, and

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           (b)           any reference to a payment made by the employer is to be read as a

reference to a payment treated, for the purposes of PAYE regulations,

as made by the relevant person.

            In this subsection “the relevant person” has the same meaning as in section 689.

 691   Mobile UK workforce

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     (1)    This section applies if it appears to the Board of Inland Revenue that—

           (a)           a person (“the relevant person”) has entered into or is likely to enter

into an agreement that employees of another person (“the contractor”)

are in any period to work for, but not as employees of, the relevant

person;

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           (b)           payments of, or on account of, PAYE income of the employees in

respect of work done in that period are likely to be made by or on behalf

of the contractor; and

           (c)           PAYE regulations would apply on the making of such payments but it

is likely that income tax will not be deducted, or will not be accounted

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for, in accordance with the regulations.

 

 

 
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