(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,
(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
(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;
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 —
(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
(ii) which (but for section 701(2)(b)) would fall itself to be regarded
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
(8) Expressions used in this section and section 476 or 477 have the same meanings
in this section as in that section.
701 Meaning of “asset”
(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—
(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-
(c) the following—
(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);
(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
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”);
(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.
(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”
(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,
(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
(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
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;
(c) an asset for which trading arrangements are in existence, or are likely
to come into existence in accordance with—
(i) any arrangements of another description existing when the
asset is provided, or
(ii) any understanding existing at that time.
(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,
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
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
(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
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
(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
(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);
(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
PAYE settlement agreements
This Chapter provides—
(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
(b) for such earnings to be treated for certain purposes of the Income Tax
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
(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
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
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
agreement relates, by reference to a number of those persons all taken
(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
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
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
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
(c) that an employee is to be treated, except—
(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
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
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
“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.
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—
(a) during a period for which the person has claimed jobseeker’s
(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.
(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
(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
(b) the assessment is made after the end of the period of 12 months
following the tax year for which it is made.
(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
(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
payments the employer actually makes of, or on account of, PAYE income of
(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
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
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—
(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
(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
(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
(7) “The relevant time” means—
(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;
(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
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.
(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
(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
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
The above definitions are subject to sections 688 and 710(2)(b).
(2) Sections 4 and 5 apply for the purposes of this Part as they apply for the
purposes of the employment income Parts.
713 Donations to charity: payroll deduction scheme
(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
“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.