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A | |
Bill | |
[AS AMENDED IN THE JOINT COMMITTEE] | |
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), | 5 |
(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— | 10 |
(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 | 15 |
(c) allows deductions to be made from such income in respect of payroll | |
giving (see Part 12). | |
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2 Abbreviations and defined expressions | |
(1) Schedule 1 (abbreviations and defined expressions) applies for the purposes of | |
this Act. | |
(2) In Schedule 1— | |
(a) Part 1 gives the meaning of the abbreviated references to Acts and | 5 |
instruments used in this Act, and | |
(b) Part 2 lists the places where expressions used in this Act are defined or | |
otherwise explained. | |
(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): | 10 |
separate indexes relating to these Chapters appear at the end of Schedules 2 to | |
5. | |
Part 2 | |
Employment income: charge to tax | |
Chapter 1 | 15 |
Introduction | |
3 Structure of employment income Parts | |
(1) The structure of the employment income Parts is as follows— | |
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, | 20 |
and | |
(b) who is liable for the tax charged; | |
Part 3 sets out what are earnings and provides for amounts to be treated | |
as earnings; | |
Part 4 deals with exemptions from the charge to tax under this Part (and, | 25 |
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- | |
related income; and | |
Part 7 deals with share-related income and exemptions. | 30 |
(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— | |
(a) any employment under a contract of service, | |
(b) any employment under a contract of apprenticeship, and | 35 |
(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; | 5 |
(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 | 10 |
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— | 15 |
(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 | 20 |
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, | 25 |
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 | 30 |
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 | 35 |
“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)). | 40 |
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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 | 5 |
employment income (see subsection (6)), excluding any exempt income. | |
(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), | 10 |
(c) Chapter 12 of Part 3 (payments treated as earnings), or | |
(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— | 15 |
(a) Part 6 (income which is not earnings or share-related), | |
(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 | 20 |
income within paragraph (a), (b) or (c) of section 7(2) is “exempt income” if, as | |
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 | 25 |
9 Amount of employment income charged to tax | |
(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. | 30 |
(3) That amount is calculated under section 11 by reference to any taxable earnings | |
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 | 35 |
income from the employment for the year (see section 10(3)). | |
(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 | 40 |
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(b) in the case of specific employment income, it is taxable specific income | |
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. | 5 |
(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 | 10 |
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. | 15 |
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]]]]](missing.gif) | |
where— | |
TE means the total amount of any taxable earnings from the employment | 20 |
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 | 25 |
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 | 30 |
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 | 35 |
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]]]]](missing.gif) | |
where— | |
TSI means the amount of any taxable specific income from the | |
employment for the tax year, and | |
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DSI means the total amount of any deductions allowed from that income | |
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 | 5 |
instead. | |
(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 | 10 |
is the total of all the amounts so calculated. | |
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). | 15 |
(2) If the tax is on general earnings, “the taxable person” is the person to whose | |
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. | 20 |
(4) If the tax is on general earnings received, or remitted to the United Kingdom, | |
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. | 25 |
Chapter 4 | |
Taxable earnings: rules applying to employee resident, ordinarily resident and | |
domiciled in UK | |
Taxable earnings | |
14 Taxable earnings under this Chapter: introduction | 30 |
(1) This Chapter sets out for the purposes of this Part what are taxable earnings | |
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— | 35 |
(a) sections 16 and 17 deal with the year for which general earnings are | |
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 | 40 |
this Chapter is a reference to section 15. | |
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