Citation and commencement

1. These Regulations may be cited as the Income Tax (Pay As You Earn) (Amendment) Regulations 2011 and shall come into force on 6th April 2011.

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

2.The Income Tax (Pay As You Earn) Regulations 2003( 3 ) are amended as follows.

3. In regulation 2 (interpretation)—

(a) after the definition of “additional pay” insert—

“ “additional rate” in relation to the charging of income tax for any tax year, means the rate of income tax determined under section 6(2) of ITA; ”

(b) for the definition of “notice” substitute—

“ “notice” means as follows and “notify” must be read accordingly—

4. In paragraph (3) of regulation 7 (meaning of “code” etc)—

(a) after sub-paragraph (b) insert—

“ (ba) the additional rate code, which effects deductions of tax wholly at the additional rate; ” ;

(b) after sub-paragraph (c) insert—

“ (ca) the 0T code, which without allowing for personal allowances, effects deductions of tax at the basic rate, higher rate and additional 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 the basic, higher and additional rates: individuals); ” ; and

(c) in sub-paragraph (d), for the words after “effects deductions of tax at”, substitute—

“ (i) the basic rate, or

(ii) the basic and higher rates, or

(iii) the basic, higher and additional rates

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 the basic, higher and additional rates: individuals); ” .

5. In regulation 15 (flat rate codes), before paragraph (1) insert—

“ (A1) HMRC may determine that the code for use by an employer in respect of an employee for a tax year is the additional rate code, if they have reason to believe that the employee will be chargeable at the additional rate on all or a substantial part of the employee’s relevant payments. ” .

6. For the cross heading which appears before regulation 32 substitute “Higher rate, additional rate and nil taxcodes”.

7. After regulation 32 insert—

“ Additional rate code: deductions

32A. If the employee’s code is the additional rate code the employer must deduct tax at the additional rate and regulations 22 and 26 (cumulative and non-cumulative basis) do not apply. ” .

8. In regulation 37 (PAYE income paid after employment ceased)—

(a) in paragraph 2 for “at the basic rate in force for the tax year in which the payment is made” substitute “using the 0T code”;

(b) in paragraph 4 omit—

(i) “regulations 26 and 27”, and

(ii) “non-cumulative basis”.

9. In regulation 37A (income paid after cessation of employment subsequently becoming subject to PAYE)—

(a) in sub-paragraph (2)(b), for “higher” substitute “additional”, and

(b) in sub-paragraph (3)(b), for “higher” substitute “additional”.

10. In paragraph (2C) of regulation 46 (Form P46 where an employer does not receive Form P45 and code not known) for “at the basic rate” substitute “on the non-cumulative basis using code 0T”.

11. In the heading to regulation 49 omit “, or (c) Form P46 not signed when required”.

12. For regulation 54 substitute—

“ 54. This Chapter applies (instead of Chapter 2) when a pension starts and either—

(a) the pensioner will be continuing in employment and will be receiving relevant pension payments in addition to relevant payments from their employer, or

(b) the pensioner will not be receiving relevant payments other than relevant pension payments. ” .

13. After regulation 54 insert—

“ Relevant pension payments and relevant payments being received by a pensioner

54A. —(1) This regulation applies if the pensioner begins to receive relevant pension payments whilst continuing to receive relevant payments from their employer.

(2) On making relevant pension payments to the pensioner, the pension payer must deduct tax on the non-cumulative basis using the 0T tax code.

(3) The pension payer must send to HMRC the following information in the Form P46(Pen)—

(a) the pensioner’s national insurance number, if known,

(b) the pensioner’s full name,

(c) the pensioner’s sex,

(d) the pensioner’s date of birth,

(e) the pensioner’s full address including postcode,

(f) the date upon which the pension payments started,

(g) the pensioner’s work payroll number and the department or branch (if any) in which the pensioner is employed,

(h) confirmation that the recipient of the relevant payments is a pensioner,

(i) the pension payer’s PAYE reference,

(j) the pension payer’s name,

(k) the pension payer’s full address including postcode, and

(l) the tax code used in relation to the pension.

(4) Before sending the Form P46(Pen), the pension payer must indicate in the form that code 0T is being used on a non-cumulative basis in respect of the pension.

Procedure in Form P46 (Pen) cases: code treated as issued by HMRC

54B. —(1) The 0T code used by the pension payer in accordance with regulation 54A is treated, for the purposes of Parts 2 to 4 (codes; deduction and repayment of tax; payments, returns and information), as having been issued by HMRC as the code for use in respect of the pensioner.

(2) This does not apply for the purposes of regulation 18 (objections and appeals) and regulations 58, 60 and 61 (Form P46(Pen)) procedure, late presentation of Form P45 etc). ” .

14. At the end of regulation 108(2)(d)(ii) (calculation of tax payable under PSA) insert—

“ and

(iii) at the basic, higher and additional rates for that tax year; ” .

15. For paragraph (3) of regulation 198A (Large employers) substitute—

“ (3) The specified date for a particular tax year is 31st October in the preceding tax year. ”