Citation and commencement

1. These Regulations may be cited as the Income Tax (Pay As You Earn) (Amendment) Regulations 2008 and shall come into force on 6th April 2008.

Amendment of Income Tax (Pay As You Earn) Regulations 2003

2.The Income Tax (Pay As You Earn) Regulations 2003( 2 ) are amended as follows.

3. In regulation 2(1) (interpretation)—

(a) insert the following definitions in the appropriate places—

“ “combined amount” means an amount which includes tax due under these regulations and one or more of the following—

“ “ ITA ” means the Income Tax Act 2007 ( 5 ) ; ” ;

“ “ Student Loan Regulations ” means the Education (Student Loans) (Repayment) Regulations 2000 ( 6 ) or, in Northern Ireland, the Education (Student Loans) (Repayment) Regulations (Northern Ireland) 2000 ( 7 ) ; ” ;

(b) omit the definition of “starting rate”.

4. In regulation 7 (meaning of “code” etc )—

(a) substitute for sub-paragraphs (d) and (e) of paragraph (3)—

“ (d) the emergency code, which, after allowing for the personal allowance, effects deductions of tax at either or both of the basic rate and the higher rate, so that during the tax year the amounts subject to deductions at the rate or rates concerned are in accordance with section 10 of ITA (income charged at basic and higher rates: individuals);

(e) the emergency IB codes which, after allowing for the personal allowance and the blind person’s allowance, effect deductions at the basic rate, so that during the tax year the amounts subject to deductions at that rate are in accordance with section 10 of ITA. ” ;

(b) insert after paragraph (3)—

“ (4) In paragraph (3)—

“blind person’s allowance” means an allowance claimed under either section 265 of ICTA ( 8 ) (blind person’s allowance) or section 38 of ITA (blind person’s allowance);

“personal allowance” means an allowance claimed under either section 257(1) of ICTA ( 9 ) (personal allowance) or section 35 of ITA (personal allowances for those aged under 65). ” .

5. In paragraph (4) of regulation 70 (quarterly tax periods), omit the definitions of “SSC Regulations” and “Student Loan Regulations”.

6. In paragraph (1) of regulation 72D( 10 ) (appeals: supplementary provisions), for “72C and 81A” substitute “72C, 72G and 81A”.

7. Insert after regulation 72D—

“ Conditions where regulation 72F applies

72E. —(1) Regulation 72F applies where—

(a) an employee has received a relevant payment;

(b) it appears to HMRC that an amount intended to represent tax on the payment—

(i) has been self-assessed, or

(ii) has not been self-assessed, but has been paid under section 59A TMA ( 11 ) (payments on account of income tax), section 559A of ICTA ( 12 ) (treatment of sums deducted under s.559 (sub-contractors)) or section 62 of the Finance Act 2004 ( 13 ) (treatment of sums deducted (sub-contractors));

(c) any of conditions A, B and C is met;

(d) a trigger event has occurred; and

(e) a trigger event did not occur before 6th April 2008.

(2) Condition A is that it appears to HMRC that the amount which the employer was liable to deduct—

(a) from the relevant payment; or

(b) in the case of a notional payment, from other relevant payments,

exceeds the amount actually deducted.

(3) Condition B is that it appears to HMRC that the amount for which the employer was required to account under regulation 62(5) (notional payments) in respect of the relevant payment exceeds the amount actually accounted for.

(4) Condition C is that—

(a) tax on the relevant payment was included in a determination under regulation 80 (determination of unpaid tax and appeal against determination); and

(b) the full amount of the determination is not paid within 30 days from the date on which the determination became final and conclusive.

(5) The following are trigger events—

(a) HMRC serve notice of a determination under regulation 80 that includes tax on the relevant payment;

(b) HMRC receive a return under section 8 of TMA ( 14 ) (personal return) which includes a self-assessment which includes tax on the relevant payment as tax treated as deducted;

(c) HMRC receive—

(i) an amended return under section 9ZA of TMA ( 15 ) (amendment of personal or trustee return by taxpayer), or

(ii) a claim under section 33 of TMA ( 16 ) (error or mistake),

which includes tax on the relevant payment as tax treated as deducted;

(d) HMRC receive a letter of offer.

(6) In paragraph (5)—

“letter of offer” means an offer in writing by the employer to agree an amount in settlement of the employer’s liability to pay an amount that includes tax on the relevant payment;

“tax treated as deducted” has the meaning given by regulation 185(6).

(7) For the purposes of this regulation tax is self-assessed if—

(a) it is included in a return under section 8 of TMA which includes a self-assessment; and

(b) ignoring any relevant credit, the tax is or would be assessed as payable by way of income tax.

(8) In paragraph (7), “relevant credit” means—

(a) a payment made under section 59A of TMA (payments on account of income tax) or 59B ( 17 ) (payment of income tax and capital gains tax); or

(b) tax deducted at source or tax treated as deducted (within the meaning given by regulation 185(6)).

Recovery from employee of tax that has been self-assessed etc.

72F. —(1) Where this regulation applies, HMRC may direct that the employer is not liable to pay an amount of tax to them.

(2) The direction may be in respect of one or more amounts that appear to HMRC to fall within regulation 72E(1)(b)(i) and (ii).

(3) A direction must be made by notice to both the employer and the employee, stating—

(a) the date the notice was issued;

(b) the amount (or amounts) within regulation 72E(1)(b) to which it relates; and

(c) which of conditions A, B and C in regulation 72E have been met.

(4) A direction may be combined with one or more other directions relating to the same employer and may be made by issuing one notice to the employer, but each employee must be issued with a separate notice.

(5) A notice need not be issued to the employee if neither HMRC nor the employer are aware of the employee’s address or last known address.

(6) The amount specified in a notice to the employee must not be added under regulation 185(5) or 188(3)(a) (adjustments to total net tax deducted for self-assessments and other assessments) in relation to the employee.

Employee’s appeal against a direction notice

72G. —(1) An employee may appeal against a direction notice under regulation 72F—

(a) by notice to HMRC,

(b) within 30 days of the issue of the direction notice,

(c) specifying the grounds of the appeal.

(2) For the purposes of paragraph (1) the grounds of appeal are that—

(a) the employee did not receive a relevant payment;

(b) the amount specified in the notice is incorrect, because all or part of it did not fall within regulation 72E(1)(b)(i) or (ii);

(c) no trigger event within regulation 72E(5) occurred; or

(d) a trigger event within regulation 72E(5) occurred before 6th April 2008.

(3) On an appeal under paragraph (1) the Commissioners may—

(a) if it appears to them that the direction should not have been made, set aside the direction; or

(b) if it appears to them that the amount specified in the notice is incorrect, increase or reduce the amount accordingly. ” .

8. —(1)Regulation 78 (notice and certificate if tax may be unpaid) is amended as follows.

(2) In paragraph (2)(b), for “the Inland Revenue” substitute “HMRC”.

(3) In paragraph (3)(b), for “the Inland Revenue” substitute “HMRC”.

(4) In paragraph (4)—

(a) for “The Inland Revenue” substitute “HMRC”;

(b) after the words “on consideration of the employer’s record of past payments” insert “whether of tax or of combined amounts”; and

(c) in sub-paragraph (a) after the words “the amount of tax” insert “or a combined amount”.

(5) In paragraph (6)—

(a) in sub-paragraph (a)—

(i) after the words “the tax period specified in the notice is” insert “or includes”, and

(ii) after the words “ the full amount” insert “of tax”, and

(b) for each iteration of “the Inland Revenue” substitute “HMRC”.

(6) In paragraph (7), for “the Inland Revenue” substitute “HMRC”.

(7) In paragraph (8)—

(a) in the first line omit the words “of tax”;

(b) in sub-paragraph (a) after the words “an amount of tax” insert “or as including an amount of tax”; and

(c) in sub-paragraph (b)—

(i) for “the Inland Revenue” substitute “HMRC”, and

(ii) for the word “tax” substitute “amount”.

(8) In paragraph (9)(b), for “the Inland Revenue” substitute “HMRC”.

(9) In paragraph (10)—

(a) after the words “employer pays an amount” insert “of tax, whether separately or as part of a combined amount, which is”; and

(b) after the words “certified under this regulation” insert “and”.

(10) In paragraph (11), after the words “set off the excess” insert “tax”.

9. In regulation 80 (determination of unpaid tax and appeal against determination)—

(a) in paragraph (1), for each iteration of “the Inland Revenue” substitute “HMRC”;

(b) in paragraph (2), for “The Inland Revenue” substitute “HMRC”; and

(c) insert after paragraph (3)—

“ (3A) A determination under this regulation must not include tax in respect of which a direction under regulation 72F has been made. ” .

10. In regulation 82 (interest on tax overdue)—

(a) in paragraph (1), for “the Inland Revenue” substitute “HMRC”; and

(b) in paragraph (4), for “regulation 72(5)” substitute “regulation 72(5), 72F”.

11. —(1)Regulation 84 (recovery of tax and interest) is amended as follows.

(2) In paragraph (2), after the words “the recovery of the unpaid amount” insert “or combined amount and any interest on it”.

(3) In paragraph (3), in paragraph (a) in column 2 of the second item in Table 4 (period relating to regulations 77(6), 78(8) and 82(2)) after the words “the date on which the unpaid amount” insert “or combined amount and any interest on it”.

(4) In paragraph (4), after the words “the unpaid amount” insert “or combined amount and any interest on it”.

(5) In paragraph (5), after the words “The unpaid amount” insert “or combined amount and any interest on it”.

12. In paragraph (2) of regulation 108 (calculation of tax payable under PSA)—

(a) substitute for sub-paragraph (d)—

“ (d) the number of those employees respectively chargeable to income tax—

(i) at only the basic rate for the tax year to which the PSA relates, and

(ii) at both the basic rate and the higher rate for that tax year; ” ; and

(b) in sub-paragraph (e) for “the Inland Revenue” substitute “HMRC”.

13. In paragraph (1) of regulation 133D( 18 ) (social security pension lump sums: notification by recipient of notice of tax rate), omit sub-paragraph (a).

14. In the definition of “direction tax” in paragraph (6) of regulation 185 (adjusting total net tax deducted for purposes of sections 59A(1) and 59B(1) TMA), for “regulation 72(5)” substitute “regulation 72(5), regulation 72F”.

15. In regulation 188 (assessments other than self-assessments)—

(a) in paragraph (3)(c)(i), for “the Inland Revenue” substitute “HMRC”;

(b) in paragraph (6), for “the Inland Revenue” substitute “HMRC”; and

(c) in the definition of “direction” in paragraph (7), for “regulation 72(5)” substitute “regulation 72(5), regulation 72F”.

16. —(1)Regulation 218 (certificate that sum due) is amended as follows.

(2) In paragraph (1), for “the Inland Revenue” substitute “HMRC”.

(3) After paragraph (2) insert—

“ (2A) HMRC may prepare a certificate showing the whole or any part of a combined amount which includes tax without specifying the components of the combined amount.

Paragraph (1) shall apply with any necessary modifications to the certificate. ” .

(4) In paragraph (3), for “the Inland Revenue” substitute “HMRC”.

(5) After paragraph (4) insert—

“ (4A) HMRC may prepare a certificate showing the total amount of interest payable in respect of the whole or any part of the combined amount without specifying which components of the combined amount the interest relates to.

Paragraph (3) shall apply with any necessary modifications to the certificate. ” .

(6) In paragraph (5), for each iteration of “the Inland Revenue” substitute “HMRC”.

(7) In paragraph (6), for the words “paragraph (1) or (3)” substitute “this regulation”.

17. In paragraph 21(3) of Schedule 1 (interest on tax overdue: application of regulation 82 to tax years from 1992-93 to 2003-04), for “regulation 72(5)” substitute “regulation 72(5), 72F”.