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Income Tax (Earnings and Pensions) Bill


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

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                  (i)                 any shares acquired by the employee (whether or not as a result

of the exercise of a right to acquire shares) 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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                  (ii)                any right over or interest in shares obtained or acquired by the

employee under such a scheme; or

                  (iii)               any shares acquired by the employee as the result of the exercise

of a right over shares obtained before 27th November 1996,

                         if the shares in question form part of the ordinary share capital of a

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company falling within subsection (3); or

           (d)           any description of property for the time being excluded from the scope

of this section by PAYE regulations.

     (3)    A company falls within this subsection if it—

           (a)           is the employer (“the employer company”);

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           (b)           has control of the employer company; or

           (c)           either is, or has control of, a company which is a member of a

consortium owning either the employer company or a company having

control of the employer company.

     (4)    In this section “share” includes stock.

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     (5)    For the purposes of this section a company is a member of a consortium

owning another company if it is one of a number of companies which between

them beneficially own not less than 75% of the other company’s ordinary share

capital and each of which beneficially owns not less than 5% of that capital.

 702   Meaning of “readily convertible asset”

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     (1)    In this Chapter “readily convertible asset” means—

           (a)           an asset capable of being sold or otherwise realised on—

                  (i)                 a recognised investment exchange (within the meaning of the

Financial Services and Markets Act 2000 (c. 8)),

                  (ii)                the London Bullion Market,

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                  (iii)               the New York Stock Exchange, or

                  (iv)                a market for the time being specified in PAYE regulations;

           (b)           an asset consisting in—

                  (i)                  the rights of an assignee, or any other rights, in respect of a

money debt that is or may become due to the employer or any

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other person,

                  (ii)                property that is subject to a warehousing regime, or any right in

respect of property so subject, or

                  (iii)               anything that is likely (without anything being done by the

employee) to give rise to, or to become, a right enabling a person

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to obtain an amount or total amount of money which is likely to

be similar to the expense incurred in the provision of the asset;

or

           (c)           an asset for which trading arrangements are in existence, or are likely

to come into existence in accordance with—

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                  (i)                 any arrangements of another description existing when the

asset is provided, or

                  (ii)                any understanding existing at that time.

 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 5 — PAYE settlement agreements

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     (2)    For the purposes of this section trading arrangements for any asset provided to

any person exist whenever there exist any arrangements the effect of which in

relation to that asset is to enable—

           (a)           that person, or

           (b)           a member of that person’s family or household,

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            to obtain an amount or total amount of money that is, or is likely to be, similar

to the expense incurred in the provision of that asset.

     (3)    PAYE regulations may exclude any description of arrangements from being

trading arrangements for the purposes of this section.

     (4)    References in this section to enabling a person to obtain an amount of money

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are to be read—

           (a)           as references to enabling an amount to be obtained by that person by

any means at all, including in particular—

                  (i)                 by using any asset or other property as security for a loan or

advance, or

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                  (ii)                by using any rights comprised in or attached to any asset or

other property to obtain any asset for which trading

arrangements exist; and

           (b)           as including references to cases where a person is enabled to obtain an

amount as a member of a class or description of persons, as well as

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where the person is so enabled in the person’s own right.

     (5)    For the purposes of this section an amount is similar to the expense incurred in

the provision of any asset if it is, or is an amount of money equivalent to—

           (a)           the amount of the expense so incurred, or

           (b)           a greater amount, or

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           (c)           an amount that is less than that amount but not substantially so.

     (6)    In this section—

                    “money” includes money expressed in a currency other than sterling;

                    “money debt” means any obligation which falls to be, or may be, settled—

                  (a)                 by the payment of money, or

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                  (b)                 the transfer of a right to settlement under an obligation which is

itself a money debt;

                    “warehousing regime” means—

                  (a)                 a warehousing or fiscal warehousing regime (within the

meaning of sections 18 to 18F of the Value Added Tax Act 1994);

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or

                  (b)                 any corresponding arrangements in a State other than the

United Kingdom which is a Contracting Party to the Agreement

on the European Economic Area signed at Oporto on 2nd May

1992 as adjusted by the Protocol signed at Brussels on 17th

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March 1993.

Chapter 5

PAYE settlement agreements

 703   Introduction

This Chapter provides—

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Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 5 — PAYE settlement agreements

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           (a)           for employers to make agreements with the Inland Revenue (“PAYE

settlement agreements”) under which they agree to be accountable to

the Board for sums in respect of income tax on general earnings of their

employees; and

           (b)           for such earnings to be treated for certain purposes of the Income Tax

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Acts as excluded from the employees’ income.

 704   Sums payable by employers under agreements

     (1)    PAYE regulations may provide—

           (a)           for a person to make a PAYE settlement agreement with the Inland

Revenue; and

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           (b)           to such extent as may be prescribed, for that person’s accountability,

and the sums to be accounted for, in respect of income tax on general

earnings of that person’s employees to be determined—

                  (i)                 in accordance with the agreement, and

                  (ii)                not in accordance with PAYE regulations which would apply

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apart from this Chapter.

     (2)    Without prejudice to the generality of section 684(2), any power of the Board to

make PAYE regulations with respect to sums falling to be accounted for under

such regulations includes power to make the corresponding provision with

respect to sums falling to be accounted for in accordance with a PAYE

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settlement agreement.

 705   Approximations allowed in calculations

PAYE regulations may provide for a PAYE settlement agreement to allow

sums which an employer is to account for—

           (a)           to be computed, if two or more persons hold employments to which the

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agreement relates, by reference to a number of those persons all taken

together;

           (b)           to include sums representing income tax on an estimated amount taken

to be the aggregate of the amounts of PAYE income consisting of—

                  (i)                 taxable benefits provided or made available by reason of the

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employments to which the agreement relates, and

                  (ii)                expenses paid to the persons holding those employments; and

           (c)           to be computed in a manner under which they do not necessarily

represent an amount of income tax which would be payable (apart

from the agreement) by persons holding employments to which the

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agreement relates.

 706   Exclusion of general earnings from income etc.

PAYE regulations may provide—

           (a)           that sums accountable for by an employer under a PAYE settlement

agreement, or any other sums, are not to be treated for any prescribed

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purpose as tax deducted from general earnings;

           (b)           that an employee is to have no right to be treated as having paid tax in

respect of sums accountable for by the employer under such an

agreement;

           (c)           that an employee is to be treated, except—

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Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 6 — Miscellaneous and supplemental

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                  (i)                 for the purposes of the obligations imposed on the employer by

such an agreement, and

                  (ii)                to such further extent as may be prescribed,

                         as relieved from any prescribed obligations of the employee under the

Income Tax Acts in respect of general earnings from an employment to

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which the agreement relates; and

           (d)           that such earnings are to be treated as excluded from the employee’s

income for such further purposes of the Income Tax Acts, and to such

extent, as may be prescribed.

 707   Interpretation of this Chapter

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In this Chapter—

                      “employment” means any employment the general earnings from which

are (or, apart from any regulations made by virtue of this section,

would be) PAYE income and related expressions are to be construed

accordingly;

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                      “prescribed” means prescribed by PAYE regulations;

                      “taxable benefit”, in relation to an employee, means any benefit provided

or made available, otherwise than in the form of a payment of money,

to the employee, or to a person who is a member of the employee’s

family or household.

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Chapter 6

Miscellaneous and supplemental

 708   PAYE repayments

     (1)    PAYE regulations may provide that no repayment of income tax may be made

under such regulations to a person—

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           (a)           during a period for which the person has claimed jobseeker’s

allowance, or

           (b)           at a time when the person is prevented by the trade disputes provisions

from being entitled to a jobseeker’s allowance, or would be so

prevented if the person otherwise met the conditions for entitlement.

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     (2)    Different provision may be made with respect to—

           (a)           persons within subsection (1)(a), and

           (b)           persons within subsection (1)(b).

     (3)    “The trade disputes provisions” means—

           (a)           section 14 of JSA 1995, or

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           (b)           Article 16 of JS(NI)O 1995.

 709   Additional provision for certain assessments

     (1)    This section applies if—

           (a)           an assessment to income tax is made as respects relevant income (with

or without other income), and

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           (b)           the assessment is made after the end of the period of 12 months

following the tax year for which it is made.

 

 

Income Tax (Earnings and Pensions) Bill
Part 11 — Pay As You Earn
Chapter 6 — Miscellaneous and supplemental

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     (2)    In so far as it relates to relevant income, the assessment is to be made in

accordance with the practice generally prevailing at the end of that period.

     (3)    “Relevant income” means income which—

           (a)           has been taken into account in the making of deductions or repayments

of tax under PAYE regulations, and

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           (b)           was received not less than 12 months before the beginning of the tax

year in which the assessment is made.

 710   Notional payments: accounting for tax

     (1)    If an employer makes a notional payment of PAYE income of an employee, the

employer must deduct income tax at the relevant time from any payment or

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payments the employer actually makes of, or on account of, PAYE income of

the employee.

     (2)    For the purposes of this section—

           (a)           a notional payment is a payment treated as made by virtue of any of

sections 687, 689 and 693 to 700, other than a payment whose amount is

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given by section 687(3)(a) or 689(3)(a), and

           (b)           any reference to an employer includes a reference to a person who is

treated as making a payment by virtue of section 689(2).

     (3)    Subsection (4) applies if, because the payments actually made are insufficient

for the purpose, the employer is unable to deduct the full amount of the income

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tax as required by subsection (1).

     (4)    The employer must account to the Board of Inland Revenue at the relevant time

for an amount of income tax equal to the amount of income tax the employer

is required, but is unable, to deduct.

     (5)    PAYE regulations may make provision—

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           (a)           with respect to the time when any notional payment (or description of

notional payment) is made,

           (b)           applying (with or without modifications) any specified provisions of

the regulations for the time being in force in relation to deductions from

actual payments to amounts accounted for in respect of any notional

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payments,

           (c)           with respect to the collection and recovery of amounts accounted for in

respect of notional payments.

     (6)    Any amount—

           (a)           which an employer deducts as mentioned in subsection (1), or

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           (b)           for which an employer accounts as mentioned in subsection (4),

            is to be treated as an amount which, at the time when the notional payment is

made, is paid by the employee in respect of the employee’s liability to income

tax.

     (7)    “The relevant time” means—

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           (a)           in subsection (1), any occasion—

                  (i)                 on or after the time when the notional payment is made, and

                  (ii)                falling within the same income tax period,

                         on which the employer actually makes a payment of, or on account of,

PAYE income of the employee;

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Income Tax (Earnings and Pensions) Bill
Part 12 — Payroll giving

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           (b)           in subsection (4), any time within 14 days of the end of the income tax

period in which the notional payment was made.

     (8)    In subsection (7) “income tax period” has the same meaning as in the Income

Tax (Employments) Regulations 1993, or any subsequent regulations making

corresponding provision.

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 711   Right to make a return

     (1)    A person who has PAYE income for a tax year in respect of which deductions

or repayments are made under PAYE regulations may by notice require the

Inland Revenue to give that person a notice under section 8 of TMA 1970

(personal return) for the tax year.

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     (2)    A notice to the Inland Revenue under subsection (1) must be given no later

than 5 years after the 31st October next following the tax year.

 712   Interpretation of this Part

     (1)    In this Part—

                    “employee” means a person who holds or has held employment with

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another person;

                    “employer” means—

                  (a)                 in relation to an employee, a person with whom the employee

holds or has held an employment, and

                  (b)                 in relation to any PAYE income of an employee, the person who

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is the employer of the employee in relation to the employment

in respect of which the income is or was provided or, as the case

may be, by reference to which it falls to be regarded as PAYE

income.

            The above definitions are subject to sections 688 and 710(2)(b).

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     (2)    Sections 4 and 5 apply for the purposes of this Part as they apply for the

purposes of the employment income Parts.

Part 12

Payroll giving

 713   Donations to charity: payroll deduction scheme

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     (1)    This section applies if—

           (a)           an individual is entitled to receive payments of, or on account of, PAYE

income in respect of which PAYE regulations require deductions or

repayments of income tax in accordance with those regulations, and

           (b)           at the request of the individual, the person making the payments (the

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“payer”) withholds sums from them as donations.

     (2)    In determining whether there is such a requirement under PAYE regulations

for the purposes of subsection (1)(a), any requirement under the regulations

which requires the deduction of an amount in calculating the payments of, or

on account of, PAYE income is to be disregarded.

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Income Tax (Earnings and Pensions) Bill
Part 12 — Payroll giving

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     (3)    The amount of the donations is allowed as a deduction in calculating the

amount of the individual’s income which is charged to tax in accordance with

subsection (4).

     (4)    In the case of a payment of, or on account of—

           (a)           taxable earnings from an employment, the deduction is allowed from

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the taxable earnings from the employment in calculating the net taxable

earnings from the employment for the relevant tax year for the

purposes of Part 2 (see section 11(1));

           (b)           taxable specific income from an employment, the deduction is allowed

from that taxable specific income in calculating the net taxable specific

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income from the employment for the relevant tax year for the purposes

of Part 2 (see section 12(1));

           (c)           taxable pension income for a pension, annuity or other item of pension

income, the deduction is allowed from that taxable pension income in

calculating the net taxable pension income for that income for the

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relevant tax year for the purposes of Part 9 (see section 567(3));

           (d)           taxable social security income for a taxable benefit, the deduction is

allowed from that taxable social security income in calculating the net

taxable social security income for that benefit for the relevant tax year

for the purposes of Part 10 (see section 658(3)).

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     (5)    For the purposes of subsection (4) “relevant tax year” means—

           (a)           in the case of paragraphs (a) and (b), the tax year in which the donation

is withheld, and

           (b)           in the case of paragraphs (c) and (d), the tax year for which the income

referred to in subsection (1)(a) is taxable pension income or taxable

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social security income, as the case may be.

 714   Meaning of “donations”

     (1)    For the purposes of this Part “donations” means sums which—

           (a)           are withheld by the payer under a scheme which is an approved

scheme at the time of the withholding,

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           (b)           constitute gifts by the individual to one or more specified charities

under the scheme, and

           (c)           satisfy the conditions (if any) set out in the scheme.

     (2)    In this section—

                    “approved scheme” means a scheme which is approved (or is of a kind

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approved) by the Inland Revenue and under which—

                  (a)                 the payer is required to pay sums withheld to a body which is

an approved agent at the time of the withholding, and

                  (b)                 the approved agent is required­­—

                      (i)                     to pay sums withheld to the specified charity or charities,

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or

                      (ii)                    in a case where the agent is itself a specified charity, to

retain any sum due to itself;

                    “charity” means any body of persons or trust established for charitable

purposes only and includes each of the bodies mentioned in section 507

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of ICTA;

                    “specified charity” means a charity specified by the individual.

 

 

 
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