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Income Tax (Earnings and Pensions) Bill


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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     (2)    The Board may give a direction that, if—

           (a)           any of the employees of the contractor work in any period for, but not

as employees of, the relevant person, and

           (b)           any payment is made by the relevant person in respect of work done by

the employees in that period,

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            income tax is to be deducted in accordance with the provisions of this section

by the relevant person on making the payment.

     (3)    A direction under subsection (2)—

           (a)           must specify the relevant person and the contractor to whom it relates;

           (b)           must be given by notice to the relevant person; and

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           (c)           may at any time be withdrawn by notice to the relevant person.

     (4)    The Board must take such steps as are reasonably practicable to ensure that a

contractor is supplied with a copy of any notice under subsection (3) which

relates to him.

     (5)    If—

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           (a)           a direction under subsection (2) has effect, and

           (b)           any employees of the contractor specified in the direction work for, but

not as employees of, the relevant person so specified,

            income tax is, subject to and in accordance with PAYE regulations, to be

deducted by the relevant person on making any payment in respect of that

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work as if so much of the payment as is attributable to work done by each

employee were a payment of PAYE income of that employee.

 692   Organised arrangements for sharing tips

     (1)    PAYE regulations may make provision with respect to organised

arrangements for tips to be shared among employees by a person (“P”) who is

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not the principal employer.

     (2)    PAYE regulations may include provisions which, for the purposes of PAYE

regulations—

           (a)           treat every payment made by P to an employee by way of the

employee’s share of any tips (including the retention by P of P’s own

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share if P is an employee) as a payment of PAYE income by P, and

           (b)           treat P as the employer in relation to every such payment.

     (3)    PAYE regulations may also include provisions which—

           (a)           apply if P has failed to comply with any of the requirements of PAYE

regulations, and

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           (b)           treat the principal employer, for the purposes of PAYE regulations, as

making payments to the employees of any tips paid over to P by the

principal employer.

     (4)    In this section—

                    “the principal employer” means the person under whose general control

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and management the employees work;

                    “tips” means gratuities and service charges.

 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 4 — PAYE: Special types of income

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Chapter 4

PAYE: Special types of income

Income provided by means of vouchers and tokens

 693   Cash vouchers

     (1)    If a cash voucher to which Chapter 4 of Part 3 (taxable benefits: vouchers and

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credit-tokens) applies is received by an employee at any time, the employer is

to be treated, for the purposes of PAYE regulations, as making at that time a

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

ascertained under section 81(2) (benefit of cash voucher treated as earnings).

     (2)    This section does not apply to the provision of a cash voucher if—

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           (a)           the voucher is used to meet expenses, and

           (b)           if the amount for which the voucher is capable of being exchanged had

been paid directly to the employee by his or her employer, the amount

would not have been PAYE income except by virtue of section 70 (sums

in respect of expenses).

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     (3)    This section does not apply to the provision of a cash voucher if it is exchanged

for an amount which—

           (a)           is used to meet expenses, and

           (b)           if it had been paid directly to the employee by the employer, would not

have been PAYE income except by virtue of section 70

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     (4)    PAYE regulations may exclude from the scope of this section the provision of

cash vouchers in circumstances specified in the regulations.

     (5)    A cash voucher provided for an employee and appropriated to the employee—

           (a)           by attaching it to a card held for the employee, or

           (b)           in any other way,

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            is to be treated for the purposes of this section as having been received by the

employee at the time when it is appropriated.

 694   Non-cash vouchers

     (1)    If a non-cash voucher to which this section applies is received by an employee,

the employer is to be treated, for the purposes of PAYE regulations, as making

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

ascertained under section 87(2) (benefit of non-cash voucher treated as

earnings).

     (2)    This section applies to a non-cash voucher to which Chapter 4 of Part 3 (taxable

benefits: vouchers and credit-tokens) applies if—

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           (a)           either of the conditions set out below is met with respect to the voucher,

and

           (b)           the voucher is not of a description for the time being excluded from the

scope of this section by PAYE regulations.

     (3)    The first condition is met with respect to a non-cash voucher if it is capable of

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being exchanged for anything which, if provided to the employee at the time

when the voucher is received, would fall to be regarded as a readily convertible

asset.

 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 4 — PAYE: Special types of income

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     (4)    The second condition is met with respect to a non-cash voucher if (but for

section 701(2)(b)) it would fall itself to be regarded as a readily convertible

asset.

     (5)    A payment under subsection (1) is made—

           (a)           in the case of a non-cash voucher other than a cheque voucher, at the

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time when the cost of provision is incurred or, if later, the time when

the voucher is received by the employee;

           (b)           in the case of a cheque voucher, at the time when the voucher is handed

over in exchange for money, goods or services.

     (6)    For the purposes of subsection (5)—

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                    “cheque voucher” has the same meaning as in Chapter 4 of Part 3,

                    “cost of provision”, in relation to a voucher provided by an employer, has

the meaning given by section 87;

            and a cheque voucher that is posted is to be treated as handed over at the time

of posting.

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     (7)    A non-cash voucher provided for an employee and appropriated to the

employee—

           (a)           by attaching it to a card held for the employee, or

           (b)           in any other way,

            is to be treated for the purposes of this section as having been received by the

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employee at the time when it is appropriated.

 695   Credit-tokens

     (1)    On each occasion on which an employee uses a credit-token provided to the

employee because of the employee’s employment to obtain—

           (a)           money, or

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           (b)           anything which, if provided to the employee at the time when the

credit-token is used, would fall to be regarded as a readily convertible

asset,

            the employer 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

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ascertained under section 94(2) (benefit of credit-token treated as earnings).

     (2)    The use of a credit-token by an employee to obtain money is excluded from the

scope of this section if the money—

           (a)           is used to meet expenses, and

           (b)           if it had been paid directly to the employee by the employer, would not

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have been PAYE income except by virtue of section 70 (sums in respect

of expenses).

     (3)    PAYE regulations may make provision for excluding from the scope of this

section any other description of use of a credit-token.

Income provided in other ways

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 696   Readily convertible assets

     (1)    If any PAYE income of an employee is provided in the form of a readily

convertible asset, the employer is to be treated, for the purposes of PAYE

 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 4 — PAYE: Special types of income

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     (1)    regulations, as making a payment of that income of an amount equal to the

amount given by subsection (2).

     (2)    The amount referred to is the amount which, on the basis of the best estimate

that can reasonably be made, is the amount of income likely to be PAYE income

in respect of the provision of the asset.

5

 697   Enhancing the value of an asset

     (1)    This section applies if—

           (a)           any PAYE income of an employee is provided in the form of anything

enhancing the value of an asset in which the employee or a member of

the employee’s family or household already has an interest, and

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           (b)           that asset, with its value enhanced, would be treated as a readily

convertible asset if PAYE income were provided to the employee in the

form of the asset at the time of the enhancement.

     (2)    Section 696 has effect as if—

           (a)           the employee had been provided, at the time of the enhancement, with

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PAYE income in the form of the asset (with its value enhanced), instead

of with what enhanced its value, and

           (b)           the reference in subsection (2) to the provision of the asset were a

reference to the enhancement of its value.

     (3)    Any reference in this section to enhancing the value of an asset is a reference

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to—

           (a)           the provision of any services by which the asset or any right or interest

in it is improved or otherwise made more valuable,

           (b)           the provision of any property the addition of which to the asset

improves it or otherwise increases its value, or

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           (c)           the provision of any other enhancement by the application of money or

property to the improvement of the asset or to securing an increase in

its value or the value of any right or interest in it.

     (4)    There is excluded from the scope of what constitutes enhancing the value of an

asset for the purposes of this section any enhancement of value arising on the

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acquisition by the employee (whether or not as a result of the exercise of a right

to acquire shares) of—

           (a)           any shares acquired by the employee under a scheme approved under

Schedule 3 (approved SAYE option schemes) or 4 (approved CSOP

schemes), or Schedule 9 to ICTA (approved profit sharing schemes);

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           (b)           any right over or interest in shares obtained or acquired by the

employee under such a scheme; or

           (c)           any shares acquired by the employee as a result of the exercise of a right

over shares obtained before 27th November 1996,

            if the shares in question form part of the share capital of a company falling

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within section 701(3).

     (5)    PAYE regulations may make provision excluding such other matters as may be

described in the regulations from the scope of what constitutes enhancing the

value of an asset for the purposes of this section.

 698   PAYE: shares ceasing to be only conditional or being disposed of

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     (1)    This section applies if—

 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 4 — PAYE: Special types of income

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           (a)           either of the following events occurs—

                  (i)                 shares cease, without the employee ceasing to have a beneficial

interest in them, to be shares in which the employee’s interest is

only conditional;

                  (ii)                in a case where shares have not so ceased, the employee sells or

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otherwise disposes of the employee’s interest or any other

beneficial interest in the shares; and

           (b)           as a result, an amount is chargeable on any person (“the relevant

person”) by virtue of section 427(1).

     (2)    This section also applies if—

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           (a)           an event occurs which is treated for the purposes of section 427 (charge

on interest in shares ceasing to be only conditional or on disposal) as an

event falling within subsection (1)(b) of that section by virtue of section

431 (disposal where employee dies); and

           (b)           as a result, an amount is chargeable on any person (“the relevant

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person”) by virtue of section 427(1).

     (3)    If this section applies, sections 684 to 691 and 696 have effect as if—

           (a)           in addition to the provision to the relevant person of the employee’s

interest in the shares, a further interest in those shares were provided

to the relevant person at the time of the event in question; and

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           (b)           the further interest were not subject to any terms by virtue of which it

would fall for the purposes of Chapter 2 of Part 7 (conditional interests

in shares) to be treated as only conditional.

     (4)    Section 696 as applied by subsection (3) has effect as if the reference in

subsection (2) of that section to the amount of income likely to be PAYE income

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in respect of the provision of the asset were a reference to the amount on which

tax is likely to be chargeable by virtue of Chapter 2 of Part 7 in respect of the

event in question.

     (5)    Expressions used in this section and any provisions of Chapter 2 of Part 7 have

the same meanings in this section as in those provisions.

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 699   PAYE: conversion of shares

     (1)    This section applies if—

           (a)           at a time when the employee has a beneficial interest in them, shares are

converted into shares of a different class as a result of an entitlement to

convert them which has been conferred on the holder, and

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           (b)           as a result, an amount is chargeable on any person (“the relevant

person”) by virtue of section 438(1).

     (2)    This section also applies if—

           (a)           an event occurs which is treated for the purposes of section 438 (charge

on conversion of shares) as an event falling within subsection (1) of that

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section by virtue of section 444 (conversion in consequence of death);

and

           (b)           as a result, an amount is chargeable on any person (“the relevant

person”) by virtue of section 438(1).

     (3)    If this section applies, sections 684 to 691 and 696 have effect as if, in addition

45

to the original provision to the relevant person of the convertible shares, the

 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 4 — PAYE: Special types of income

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     (3)    shares into which they were converted were also provided to the relevant

person at the time of the event in question.

     (4)    Subsection (3) applies in a case where the convertible shares were themselves

acquired—

           (a)           by means of a taxable conversion (as defined in section 439(6)), or

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           (b)           by means of a series of such conversions,

            as if the reference to the original provision of the convertible shares were a

reference to the provision of the shares which were converted by the earlier or

earliest conversion.

     (5)    Section 696 as applied by subsection (3) has effect as if the reference in

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subsection (2) of that section to the amount of income likely to be PAYE income

in respect of the provision of the asset were a reference to the amount on which

tax is likely to be chargeable by virtue of Chapter 3 of Part 7 (convertible shares)

in respect of the event in question.

     (6)    Expressions used in this section and any provisions of Chapter 3 of Part 7 have

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the same meanings in this section as in those provisions

 700   PAYE: gains from share options

     (1)    This section applies if—

           (a)           a gain is realised by the exercise, assignment or release of a right to

acquire shares, and

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           (b)           as a result, an amount is chargeable on any person (“the relevant

person”) by virtue of section 476 or 477 (charge on exercise etc. of share

option).

     (2)    In the case of the exercise of a right to acquire shares, section 696 has effect as

if the relevant person were being provided with PAYE income in the form of

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the shares—

           (a)           at the time the relevant person acquires the shares in the exercise of the

right, and

           (b)           in respect of the employment because of which the relevant person was

granted the right.

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     (3)    In the case of the assignment or release of a right to acquire shares, sections 684

to 691 and 696 have effect—

           (a)           in so far as the consideration for the assignment or release takes the

form of a payment, as if so much of that payment as does not exceed—

                  (i)                 the relevant proportion of the amount chargeable by virtue of

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section 476 or 477 in respect of the assignment or release of the

right, less

                  (ii)                the amount of any relief likely to be available under section 481

(deductible amount in respect of secondary Class 1

contributions met by employee),

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                         were a payment of PAYE income of the relevant person; and

           (b)           in so far as that consideration consists in the provision of an asset, as if

the provision of the asset were the provision of PAYE income in the

form of the asset—

                  (i)                 to the relevant person, and

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                  (ii)                in respect of the employment because of which the relevant

person was granted the right.

 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 4 — PAYE: Special types of income

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     (4)    Section 696 as applied by subsection (2) or (3) has effect as if the reference in

subsection (2) of that section to the amount of income likely to be PAYE income

in respect of the provision of the asset were a reference to—

           (a)           the relevant proportion of the amount chargeable by virtue of section

476 or 477 in respect of the exercise, assignment or release of the right,

5

less

           (b)           the amount of any relief likely to be available under section 481.

     (5)    PAYE regulations may make provision for excluding payments from the scope

of subsection (3)(a) in such circumstances as may be specified in the

regulations.

10

     (6)    In this section—

                    “asset” includes anything to which subsection (7) applies;

                    “the relevant proportion” means the proportion that so much of the

consideration as takes the form of a payment, or (as the case may be)

consists in the provision of an asset, bears to the whole consideration;

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            and anything to which subsection (7) applies is treated as a readily convertible

asset for the purposes of section 696 as applied by subsection (3)(b) or (4).

     (7)    This subsection applies to—

           (a)           any cash voucher;

           (b)           any non-cash voucher —

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                  (i)                 which is capable of being exchanged for anything which, if

provided to the employee at the time when the voucher is

received, would fall to be regarded as a readily convertible

asset; or

                  (ii)                which (but for section 701(2)(b)) would fall itself to be regarded

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as a readily convertible asset; and

           (c)           any credit-token which is capable of being used to obtain—

                  (i)                 money; or

                  (ii)                anything which, if provided to the employee at the time when

the token is used, would fall to be regarded as a readily

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convertible asset.

     (8)    Expressions used in this section and section 476 or 477 have the same meanings

in this section as in that section.

Supplemental

 701   Meaning of “asset”

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     (1)    In this Chapter “asset” includes any property and in particular any investment

of a kind specified in Part 3 of the Financial Services and Markets Act 2000

(Regulated Activities) Order 2001 (S.I. 2001/544).

            This is subject to subsection (2).

     (2)    In this Chapter “asset” does not include—

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           (a)           any payment actually made of, or on account of, PAYE income;

           (b)           subject to section 700(6), any cash voucher, non-cash voucher or credit-

token;

           (c)           the following—

 

 

 
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