Statutory Instrument 2003 No. 2682

The Income Tax (Pay As You Earn) Regulations 2003

(The document as of February, 2008)

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STATUTORY INSTRUMENTS

2003 No. 2682

INCOME TAX

The Income Tax (Pay As You Earn) Regulations 2003

	Made	21st October 2003
	Laid before the House of Commons[a]	30th October 2003
	Coming into force	6th April 2004

ARRANGEMENT OF REGULATIONS

PART 1
INTRODUCTIONCitation and commencement

1.	Citation and commencement

Interpretation

2.	Interpretation

3.	Net PAYE income

4.	Relevant payments

5.	Excluded business expenses

6.	Relevant pension payments

7.	Meaning of "code" etc

8.	Employee's code

9.	PAYE threshold

Application to payers and payees

10.	Application to agencies and agency workers

11.	Application to pension payers and pensioners

12.	Application to other payers and payees

PART 2
CODESDetermination of code

13.	Determination of code by Inland Revenue

14.	Matters relevant to determination of code

15.	Flat rate codes

16.	Continued application of employee's code

17.	Notice to employee of code

Appeals and amendment

18.	Objections and appeals against employee's code

19.	Amendment of code

20.	Notice to employer of amended code

PART 3
DEDUCTION AND REPAYMENT OF TAX
CHAPTER 1
DEDUCTION AND REPAYMENTDeduction and repayment by reference to employee's code

21.	Deduction and repayment of tax by reference to employee's code

The cumulative basis

22.	The cumulative basis

23.	Cumulative basis: deduction and repayment

24.	Cumulative basis: employee not paid weekly or monthly

25.	Cumulative basis: subsidiary PAYE income of employee paid weekly or at greater intervals

The non-cumulative basis

26.	The non-cumulative basis

27.	Non-cumulative basis: general rule for deductions

28.	Non-cumulative basis: modification of general rule

29.	Non-cumulative basis: aggregation of payments

30.	Non-cumulative basis: employee not paid weekly or monthly

31.	Payments in short payment periods

Higher rate and nil tax codes

32.	Higher rate code: deductions

33.	Nil tax code: no deductions or repayments

Simplified deduction scheme

34.	Simplified deduction scheme for personal employees

35.	Simplified deduction schemes: records

Cessation of employment

36.	Cessation of employment: Form P45

37.	PAYE income paid after employment ceased

38.	Death of employee

39.	Death of pensioner

Employee's duty to provide Form P45

40.	Duty of employee to give new employer Form P45

CHAPTER 2
NEW EMPLOYEES (OTHER THAN PENSIONERS): FORMS P45 AND P46

41.	Scope of Chapter 2

42.	Procedure if employer receives Form P45

43.	Form P45 for current tax year

44.	Form P45 for previous tax year: employment starting on or before 24th May

45.	Other Forms P45

46.	Form P46 where employer does not receive Form P45 and code not known

47.	Procedure in Form P46 cases: former full-time students

48.	Procedure in Form P46 cases: employee taking up only or main employment

49.	Procedure in Form P46 cases: other new employees

50.	Form P46 cases: code treated as issued by Inland Revenue

51.	Late presentation of Form P45

52.	Late presentation of Form P45: employer's duties

53.	Form P46 cases: subsequent procedure on issue of employee's code

CHAPTER 3
NEW PENSIONERS: FORMS P45 AND P46

54.	Scope of Chapter 3

55.	PAYE pension income paid by former employer

56.	PAYE pension income paid by other pension payer

57.	Information to be provided in Form P46 if code not known: non UK residents

58.	Information (Form P46) and procedure if code not known: UK residents

59.	UK resident pensioner's code treated as issued by Inland Revenue

60.	Late presentation of Form P45

61.	Subsequent procedure on issue of UK resident pensioner's code

CHAPTER 4
MISCELLANEOUS

62.	Deductions in respect of notional payments

63.	Repayment during unpaid leave

64.	Trade disputes

65.	Repayment if no longer employed

66.	Deductions working sheets

67.	Information to employees about payments and tax deducted (Form P60)

PART 4
PAYMENTS, RETURNS AND INFORMATION
CHAPTER 1
PAYMENT OF TAX AND ASSOCIATED RETURNSPayment and recovery of tax by employer

68.	Periodic payments to and recoveries from the Revenue

69.	Due date and receipts for payment of tax

70.	Quarterly tax periods

71.	Modification of regulation 68 in case of trade dispute

72.	Recovery from employee of tax not deducted by employer

Annual returns of relevant payments and tax

73.	Annual return of relevant payments liable to deduction of tax (Forms P35 and P14)

74.	Annual return of relevant payments not liable to deduction of tax (Form P38A)

75.	Additional return in case of trade dispute

Failure to account for deductible tax

76.	Certificate if tax in regulation 73 return is unpaid

77.	Return and certificate if tax may be unpaid

78.	Notice and certificate if tax may be unpaid

79.	Certificate after inspection of PAYE records

80.	Determination of unpaid tax and appeal against determination

81.	Employee liability if tax unpaid after regulation 80 determination

Interest

82.	Interest on tax overdue

83.	Interest on tax overpaid

Recovery

84.	Recovery of tax and interest

CHAPTER 2
OTHER RETURNS AND INFORMATIONReturns involving PAYE income other than payments

85.	Employers: annual return of other earnings (Forms P11D and P9D)

86.	Information employer must provide for each employee

87.	Information employer must also provide for benefits code employees

88.	Annual return of other earnings: amounts

89.	Annual return of other earnings: exclusion for notional payments

90.	Quarterly return if a car becomes available or unavailable (Form P46 (Car))

91.	Termination awards: information to be provided

92.	Termination awards: return if award changes

93.	Termination awards: return if more than one employer

Information to be given to employees

94.	Employers: information to employees of other earnings (Forms P11D and P9D)

95.	Third parties: information to employees of other earnings

96.	Termination awards: information to employees

CHAPTER 3
PAYE RECORDS

97.	Inspection of employer's PAYE records

PART 5
EMPLOYERSSpecial arrangements

98.	Multiple PAYE schemes

99.	Multiple PAYE schemes: election made for improper purpose ineffective

100.	Tips: special arrangements

Death of employer and succession

101.	Death of employer

102.	Succession to a business etc

103.	Death and succession

104.	Succession to a business: trade disputes

PART 6
PAYE SETTLEMENT AGREEMENTSMaking and effect of PSA

105.	Inland Revenue and employer may make PSA

106.	Qualifying general earnings

107.	Effect of PSA

Payment of tax under PSA

108.	Calculation of tax payable under PSA

109.	Payment of tax and recovery proceedings

110.	Formal determination of tax payable by the employer

Form and commencement of PSA

111.	Form of PSA

112.	Commencement of PSA

Variation and cancellation of PSA

113.	Variation of PSA

114.	Cancellation of PSA

Interest

115.	Interest on unpaid tax

116.	Interest on overpaid tax

Records

117.	Inspection of PSA records

PART 7
SPECIAL CASES
CHAPTER 1
COUNCILLORS' ALLOWANCES

118.	Interpretation of Chapter 1

119.	Councillor's option to have tax deducted at basic rate

120.	Particulars that local council must record

121.	Regulations apply as if basic rate option were issue of code

CHAPTER 2
RESERVE FORCES' PAY

122.	Interpretation of Chapter 2

123.	Application of other Parts

124.	Deduction of tax

125.	Determination by Inland Revenue

126.	Objection against deduction of tax

127.	Appeal to Commissioners

128.	Amended determinations

129.	Certificate of tax deducted

130.	Repayment to reservist during tax year

131.	Particulars that Ministry must record

132.	End of year certificate

133.	Other PAYE income of reservist

CHAPTER 3
HOLIDAY PAY FUNDS

134.	Interpretation of Chapter 3

135.	Application of other Parts

136.	Deduction of tax

137.	Certificate of tax deducted

138.	Repayment to recipient during tax year

139.	Particulars that fund must record

140.	Other PAYE income of recipient

CHAPTER 4
DIRECT COLLECTION AND SPECIAL ARRANGEMENTS

141.	Direct collection and special arrangements

142.	Direct collection: issue of deductions working sheet

143.	Direct collection: employee to keep records

144.	Direct collection: payment

145.	Direct collection: return when relevant payments cease

146.	Direct collection: end of year return

147.	Direct collection: failure to pay

PART 8
SOCIAL SECURITY BENEFITS
CHAPTER 1
JOBSEEKER'S ALLOWANCE: NORMAL CASES

148.	Interpretation of Chapters 1 and 2

149.	Scope of Chapter 1

150.	Application of other regulations

151.	Obtaining the claimant's Form P45

152.	Deductions working sheet for claimants awarded taxable jobseeker's allowance

153.	Form P45: deductions working sheet and return

154.	No Form P45: deductions working sheet and return

155.	Claimant's code etc to be used for calculations

156.	Recording the amount of taxable jobseeker's allowance

157.	Obligations at end of tax year

158.	When an award ceases

159.	Cessation of award: Form P45U

160.	Notification of taxable jobseeker's allowance adjustment

161.	Tax calculation

162.	No tax calculation required in certain cases

163.	Death of claimant

164.

Finance

CHAPTER 2
JOBSEEKER'S ALLOWANCE: SPECIAL CASES

165.	Scope of Chapter 2

166.	Jobseeker's allowance paid directly to claimant

167.	Jobseeker's allowance paid by employer

168.	Regulation 167 cases: application of other regulations

169.	When a Chapter 2 award ceases

170.	Information to be supplied at end of tax year

171.	Information to be supplied when an award of taxable jobseeker's allowance ceases

172.	Adjustments of taxable jobseeker's allowance

CHAPTER 3
INCAPACITY BENEFIT

173.	Interpretation of Chapter 3

174.	Application of other regulations

175.	Emergency IB code to be used before claimant's code issued

176.	Return in respect of all claimants to taxable incapacity benefit

177.	Further return required in certain cases

178.	Delivery of Form P45 to Department

179.	Determination of claimant's code by Inland Revenue

180.	Death of claimant

CHAPTER 4
INCOME SUPPORT

181.	Interpretation of Chapter 4

182.	Recording the amount of taxable income support

183.	Information to be supplied when an award of taxable income support ceases

184.	Adjustments of taxable income support

PART 9
ASSESSMENT AND SELF-ASSESSMENT

185.	Adjusting total net tax deducted for purposes of sections 59A(1) and 59B(1) TMA

186.	Recovery: adjustment of employee's code

187.	Repayment: adjustment of employee's code

188.	Assessments other than self-assessments

PART 10
COMMUNICATIONS
CHAPTER 1
ELECTRONIC COMMUNICATIONS: INTERPRETATION

189.	Meaning of electronic communications etc

190.	Specified date

191.	Large and medium sized employers

CHAPTER 2
ELECTRONIC COMMUNICATIONS: GENERAL

192.	Whether information has been delivered electronically

193.	Proof of content of electronic delivery

194.	Proof of identity of person sending or receiving electronic delivery

195.	Information sent electronically on behalf of a person

196.	Proof of delivery of information sent electronically

197.	Proof of payment sent electronically

198.	Use of unauthorised method of electronic communications

CHAPTER 3
ELECTRONIC PAYMENT BY LARGE EMPLOYERS

199.	Large employers required to make specified payments electronically

200.	E-payment notices and appeal

201.	Employer in default if specified payment not received by applicable due date

202.	Default notice and appeal

203.	Default surcharge

204.	Surcharge notice and appeal

CHAPTER 4
MANDATORY USE OF ELECTRONIC COMMUNICATIONS

205.	Mandatory use of electronic communications

206.	Specified employers

207.	Specified information

208.	E-filing notice and appeals

209.	Standards of accuracy and completeness

210.	Penalties and appeals

CHAPTER 5
METHODS OF PROVIDING INFORMATION ETC

211.	How information must or may be delivered by employers

212.	Modifications for electronic version of Form P160

213.	How information may be delivered by Inland Revenue

214.	How information must be provided by employees

215.	Meaning of Form P45 and P46

216.	Service by post

PART 11
SUPPLEMENTARY PROVISIONSMiscellaneous appeals

217.	Appeals: supplementary provisions

Certificate that sum due and payment by cheque

218.	Certificate that sum due

219.	Payment by cheque

Transitional provisions, savings and revocations

220.	Transitional provisions, savings and revocations

SCHEDULE 1

TRANSITIONAL PROVISIONS AND SAVINGS

PART 1

GENERAL PROVISIONS

PART 2

SPECIFIC PROVISIONS

SCHEDULE 2

REVOCATIONS

The Commissioners of Inland Revenue in exercise of the powers conferred on them by sections 684, 685(4), 692, 704, 705, 706, 707, 708 and 710 of the Income Tax (Earnings and Pensions) Act 2003[1], sections 59A(10), 59B(8), 98A and 113(1) of the Taxes Management Act 1970[2], sections 132 and 133(2) of the Finance Act 1999[3], section 136 of the Finance Act 2002[4], and sections 145(4) and 205 of the Finance Act 2003[5], hereby make the following Regulations:

PART 1
INTRODUCTION
Citation and commencement
Citation and commencement
1.These Regulations may be cited as The Income Tax (Pay As You Earn) Regulations 2003 and shall come into force on 6th April 2004.

Interpretation
Interpretation
2. - (1) In these Regulations, unless the context otherwise requires -

"additional pay" means the appropriate amount, established from an employee's code (where it is a K code not used on the cumulative basis) and the tax tables, to be added to the relevant payments made to an employee in order to determine the taxable payments;

"agency" has the meaning given in section 44 of ITEPA;

"agency worker" means a worker whose services are treated by section 44 of ITEPA as the duties of an employment held with the agency;

"approved method of electronic communications" has the meaning given in regulation 189;

"basic rate", in relation to the charging of income tax for any tax year, means the rate of income tax determined under section 1(2)(a) of ICTA[6];

"Board of Inland Revenue" means the Commissioners of Inland Revenue (as to which see in particular the Inland Revenue Regulation Act 1890[7]);

"code" and related expressions have the meanings given in regulation 7;

"cumulative basis" means the basis of deduction or repayment of tax provided for in regulation 23;

"deductions working sheet" means -

"earnings" has the meaning given in sections 62 and 721(7) of ITEPA;

"electronic communications" has the meaning given in regulation 189;

"employee's code" has the meaning given in regulation 8(1);

"employer reference" means the combination of letters, numbers or both used by the Inland Revenue to identify an employer for the purposes of these Regulations;

"employer's PAYE reference", in relation to an employer, means the combination of the employer's employer reference and the Inland Revenue office number;

"employment", subject to regulations 10 to 12, has the meaning given in sections 4 and 5 of ITEPA; and "employer" and "employee" have corresponding meanings;

"excluded business expenses" has the meaning given in regulation 5;

"family" and "family or household", in relation to a person, have the meanings given in section 721(4) and (5) of ITEPA;

"free pay" means the appropriate amount, established from an employee's code (where not used on the cumulative basis) and the tax tables, to be subtracted from relevant payments to arrive at taxable payments (and accordingly represents an appropriate part of reliefs allowable against those payments);

"general earnings" has the meaning given in section 7(3) of ITEPA;

"higher rate", in relation to the charging of income tax for any tax year, means the rate of income tax determined under section 1(2)(b) of ICTA[8];

"ICTA" means the Income and Corporation Taxes Act 1988[9];

"Inland Revenue" means any officer of the Board of Inland Revenue;

"Inland Revenue office", in relation to an employer, means the office of the Inland Revenue from which codes are normally issued to the employer;

"Inland Revenue office number" means the number which identifies an employer's Inland Revenue office;

"ITEPA" means the Income Tax (Earnings and Pensions) Act 2003[10];

"large employer" and "large or medium employer" have the meanings given in regulation 191;

"national insurance number" means the national insurance number allocated within the meaning of regulation 9 of the Social Security (Crediting and Treatment of Contributions, and National Insurance Numbers) Regulations 2001[11];

"net PAYE income" has the meaning given in regulation 3;

"non-cumulative basis" means the basis of deduction of tax provided for in regulation 27;

"notice" means notice in writing, or in a form authorised (in relation to the case in question) by directions under section 118 of the Finance Act 1998[12] (which allows certain claims etc to be made by telephone); and "notify" must be read accordingly;

"notional payment" has the meaning given in section 710(2)(a) of ITEPA;

"objects" means gives a notice of objection to the Inland Revenue;

"official computer system" has the meaning given in regulation 189;

"other payee" means a person receiving relevant payments in a capacity other than employee, agency worker or pensioner;

"other payer" means a person making relevant payments in a capacity other than employer, agency or pension payer;

"overriding limit" means the limit on the amount of tax to be deducted from a relevant payment, where the tax due in accordance with the appropriate tax tables in respect of any taxable payments or total taxable payments to date at the relevant date has been calculated by reference to additional pay or total additional pay to date, and that limit is an amount equal to 50% of the amount of the relevant payment;

"PAYE income" has the meaning given in section 683 of ITEPA;

"PAYE pension income" has the meaning given in section 683(3) of ITEPA;

"PAYE threshold" must be determined in accordance with regulation 9;

"payee" means an employee, agency worker, pensioner or other payee;

"payer" means an employer, agency, pension payer or other payer;

"pension" means a pension, annuity or other payments of PAYE pension income;

"pensioner" means a person receiving PAYE pension income;

"pension payer" means a person making payments of PAYE pension income;

"PSA" means a PAYE settlement agreement made in accordance with regulation 105;

"qualifying general earnings", in relation to a PSA, has the meaning given in regulation 106;

"reckonable date" has the meaning given in regulation 82(8);

"relevant payments" has the meaning given in regulation 4;

"relevant pension payments" has the meaning given in regulation 6;

"reliefs from income tax" includes allowances and deductions;

"specified date", for the purposes of Chapters 3 and 4 of Part 10, has the meaning given in regulation 190;

"starting rate", in relation to the charging of income tax for any tax year, means the rate of income tax determined under section 1(2)(aa) of ICTA[13];

"taxable payments" means relevant payments reduced by free pay or, as the case may be, increased by additional pay (where the employee's code is not used on the cumulative basis);

"tax month" means the period beginning on the 6th day of a calendar month and ending on the 5th day of the following calendar month;

"tax not deducted because of the overriding limit" means any tax -

"tax period" means -

"tax quarter" means any of the following (inclusive) periods -

"tax tables" means the tax tables prepared by the Board of Inland Revenue under section 685 of ITEPA[14];

"tax week" means 6th April to 12th April (inclusive) and each successive period of 7 days, except that the final tax week in a tax year ("Week 53") is just the last day of the tax year (or last 2 days in a leap year);

"tax year" means a year for which any Act provides for income tax to be charged;

"TMA" means the Taxes Management Act 1970[15];

"total additional pay to date" means the appropriate amount, established from an employee's code (where it is a K code to be used on the cumulative basis) and the tax tables, to be added to the total payments to date in order to determine the total taxable payments to date;

"total free pay to date", in relation to any date, means the appropriate amount, established from an employee's code (where used on the cumulative basis) and the tax tables, to be subtracted from total payments to date to arrive at total taxable payments to date (and accordingly represents an appropriate part of reliefs allowable against those payments);

"total net tax deducted", in relation to the relevant payments made to an employee during any period, means the total tax deducted from those payments plus any tax accounted for in accordance with regulation 62(5) (notional payments), less any tax repaid to the employee;

"total payments to date", in relation to any date, means the sum of all relevant payments made by the employer to the employee from the beginning of the tax year up to and including that date;

"total tax to date" means the tax due at any date in accordance with the appropriate tax tables in respect of any total taxable payments to date;

"total taxable payments to date" means total payments to date reduced by total free pay to date or, as the case may be, increased by total additional pay to date (where the employee's code is used on the cumulative basis);

"trade dispute" has the meaning given in section 35(1) of the Jobseekers Act 1995[16] or, in Northern Ireland, in article 2(2) of the Jobseekers (Northern Ireland) Order 1995[17].

(2) References in these Regulations to income tax in respect of PAYE income (however expressed) are references to income tax in respect of that income if reasonable assumptions are, when necessary, made about other income.

Net PAYE income
3. - (1) "Net PAYE income" means PAYE income less any -

(2) In paragraph (1) -

"allowable pension contributions" means any contribution towards a scheme which is withheld from the payment of PAYE income and for which a deduction must be allowed from employment income under section 592(7) or 594(1) of ICTA[18] (exempt approved schemes and exempt statutory schemes);

"allowable donations to charity" means any donation which is withheld from the payment of PAYE income and for which a deduction must be allowed under section 713 of ITEPA (donations to charity: payroll deduction scheme).

Relevant payments
4. - (1) In these Regulations, any reference (however expressed) to relevant payments means payments of, or on account of, net PAYE income, except payments of, or on account of, -

(2) In paragraph (1) -

"excluded business expenses" has the meaning given in regulation 5;

"excluded notional payments" means notional payments which an employer is treated as making by section 694 or 695 of ITEPA (non-cash vouchers and credit tokens) as a result of an employee using a non-cash voucher or credit token on behalf of the employer, except where the voucher or token is used as, or as part of, any scheme or arrangement the purpose, or one of the main purposes, of which is -

"excluded pecuniary liabilities" means payments made to a person other than an employee to meet the employee's liability to that other person, but which are not made -

"excluded relocation expenses" means payments in respect of removal expenses, as defined by section 272 of ITEPA (removal benefits and expenses to which section 271 applies), if, and to the extent that, they are payments of net PAYE income;

"PAYE social security income" has the meaning given in section 683(5) of ITEPA;

"United Kingdom social security pensions" means income which is taxable income in accordance with section 578 of ITEPA (UK social security pensions).

Excluded business expenses
    5. - (1) "Excluded business expenses" means expenses within Chapter 3 of Part 3 of ITEPA (earnings and benefits treated as earnings) which the Inland Revenue have authorised the employer to exclude from relevant payments in accordance with this regulation.

    (2) The Inland Revenue may authorise an employer to exclude any payment of expenses from relevant payments if the Inland Revenue are of the opinion that a deduction or relief will, or is likely to, result in no tax being payable as a result of the payment.

    (3) The Inland Revenue may authorise the exclusion of -

    (4) The Inland Revenue must notify an employer of any excluded business expenses and the date from which the exclusion is to apply.

    (5) The Inland Revenue may revoke the authorisation to exclude business expenses by giving notice to the employer specifying the date of the notice or a subsequent date as the date from which the revocation has effect.

Relevant pension payments
    6.In these Regulations, any reference (however expressed) to relevant pension payments means relevant payments in respect of PAYE pension income.

Meaning of "code" etc
    7. - (1) In these Regulations, "code" means -

(2) "K code" means a code which gives rise to additional pay or total additional pay to date.

(3) The special codes are -

effect deductions of tax at one or both of the starting rate and basic rate, so that during the tax year the amounts subject to deductions at the various rates are in accordance with section 1(2) of ICTA.

Employee's code
8. - (1) An employee's code is the code -

(2) A code is issued to an employer if it is contained in a document that is sent -

by the Inland Revenue, and any code so issued is received by the employer for the purposes of these Regulations.

PAYE threshold
    9. - (1) The rules set out in Table 1 apply in order to determine whether a relevant payment made by an employer to an employee is a relevant payment which exceeds the PAYE threshold.

    (2) Rules 1 to 5 apply if the employer normally pays the employee at regular intervals.

    (3) If the employer does not normally pay the employee at regular intervals -

Table 1Determination of PAYE threshold

Employee's payment interval	Rule to determine whether relevant payment exceeds PAYE threshold
1.Weekly	1.If the sum of the relevant payment and any other relevant payments made earlier in the same tax week is more than the weekly PAYE threshold.
2.Monthly	2.If the sum of the relevant payment and any other relevant payments made earlier in the same tax month is more than the monthly PAYE threshold.
3.Regular intervals which are multiples of a week	3.If the sum of the relevant payment and any other relevant payments made earlier in the same interval is more than the corresponding multiple of the weekly PAYE threshold.
4.Regular intervals, longer than a week, which are fractions or multiples of a month	4.If the sum of the relevant payment and any other relevant payments made earlier in the same interval is more than the corresponding fraction or multiple of the monthly PAYE threshold.
5.Regular intervals, longer than a week, which are not within rules 1 to 4	5.If the sum of the relevant payment and any other relevant payments made earlier in the same interval is more than the corresponding proportion of the weekly PAYE threshold.
6.Intervals shorter than a week, whether regular or irregular	6.If the sum of the relevant payment and any other relevant payments made earlier in the same tax week is more than the weekly PAYE threshold.
7.Irregular intervals longer than a week	7.If the relevant payment is more than the corresponding proportion of the weekly PAYE threshold since - (a) any previous relevant payment in the tax year, or (b) if none, the start of the employment or the start of the tax year (whichever is later).

(4) Regulations 24 and 30 (employee not paid weekly or monthly) -

    (5) If an employee has more than one normal payment interval in respect of payments made by the same employer, the rules must be applied on the basis of the shorter or shortest of those intervals.

    (6) If an employee's normal payment interval is longer than a year, the rules must be applied as if the normal payment interval were a year.

    (7) "Weekly PAYE threshold" means 1/52 of the personal allowance specified in section 257(1) of ICTA, rounded to the nearest pound.

    (8) "Monthly PAYE threshold" means 1/12 of the personal allowance specified in section 257(1) of ICTA, rounded to the nearest pound.

    (9) The "corresponding proportion of the weekly PAYE threshold" is established by dividing the number of days in the payment interval by 7, and multiplying the result by the weekly PAYE threshold.

Application to payers and payees
Application to agencies and agency workers
10. - (1) For the purposes of these Regulations -

(2) For the purposes of the regulations listed in paragraph (3), an agency ceases to employ an agency worker at the earlier of -

and not each time the agency worker stops providing services to a client of the agency.

(3) The regulations are -

regulation 36	cessation of employment: Form P45
regulation 37	PAYE income paid after employment ceased
regulation 46(6)	employer to ignore code relating to employment which has ceased
regulation 51(5) to (7)	effects of employment ceasing on Form P45 procedure
regulation 94(3) to (7)	information to former employees of other earnings.

(4) The following regulations do not apply to agencies or agency workers in their capacity as such -

regulation 34	simplified deduction scheme for personal employees
regulation 35	simplified deduction schemes: records
regulation 91	termination awards: information to be provided
regulation 92	termination awards: return if award changes
regulation 93	termination awards: return if more than one employer
regulation 96	termination awards: information to employees
Part 6	PAYE settlement agreements
regulation 167	jobseeker's allowance paid by employer
regulation 168	regulation 167 cases: application of other regulations.

Application to pension payers and pensioners
11. - (1) For the purposes of these Regulations -

(2) The following regulations do not apply to pension payers or pensioners in their capacity as such -

regulation 25	cumulative basis: subsidiary PAYE income of employee paid weekly or at greater intervals
regulation 34	simplified deduction scheme for personal employees
regulation 35	simplified deduction schemes: records
regulation 38	death of employee (other than pensioner)
Chapter 2 of Part 3	new employees (other than pensioners): Forms P45 and P46
regulation 63	repayment during unpaid leave
regulation 64	trade disputes
regulation 65	repayment if no longer employed
regulation 71	modification of regulation 68 in case of trade dispute
regulation 75	additional return in case of trade dispute
regulations 85 to 89	employers: annual return of other earnings
regulation 90	quarterly return if car becomes available or unavailable
regulation 91	termination awards: information to be provided
regulation 92	termination awards: return if award changes
regulation 93	termination awards: return if more than one employer
regulation 94	employers: information to employees of other earnings
regulation 95	third parties: information to employees of other earnings
regulation 96	termination awards: information to employees
regulation 100	tips: special arrangements
regulation 102(1)	succession to a business etc: employees (other than pensioners)
regulation 104	succession to a business: trade disputes
Part 6	PAYE settlement agreements
Chapter 3 of Part 7	holiday pay funds
regulation 151	obtaining the claimant's Form P45
regulation 167	jobseeker's allowance paid by employer
regulation 168	regulation 167 cases: application of other regulations.

Application to other payers and payees
12. - (1) For the purposes of these Regulations -

(2) The following regulations do not apply to other payers or other payees in their capacity as such -

regulation 34	simplified deduction scheme for personal employees
regulation 35	simplified deduction schemes: records
regulation 85 to 88	employers: annual return of other earnings
regulation 90	quarterly return if car becomes available or unavailable
regulation 91	termination awards: information to be provided
regulation 92	termination awards: return if award changes
regulation 93	termination awards: return if more than one employer
regulation 94	employers: information to employees of other earnings
regulation 95	third parties: information to employees of other earnings
regulation 96	termination awards: information to employees
Part 6	PAYE settlement agreements
regulation 134	interpretation of Chapter 3 (holiday pay funds)
regulation 167	jobseeker's allowance paid by employer
regulation 168	regulation 167 cases: application of other regulations.

(3) Paragraph (2) is subject to regulation 91(9) (termination awards: former employers and employees).

(4) The following regulation does not apply to other payees in their capacity as such -

regulation 64

trade disputes.

PART 2
CODES
Determination of code
Determination of code by Inland Revenue
13.The Inland Revenue must determine the code for use by an employer in respect of an employee for a tax year.

Matters relevant to determination of code
14. - (1) If the Inland Revenue determine a code under this regulation, they must have regard to the following matters so far as known to them -

(2) If the Inland Revenue determine the code before the beginning of the tax year for which it is determined, the Inland Revenue -

    (3) Paragraphs (1)(c) and (d) are subject to regulations 186 and 187 (recovery and repayment: adjustment of employee's code).

Flat rate codes
    15. - (1) The Inland Revenue may determine that the code for use by an employer in respect of an employee for a tax year is the higher rate code, if they have reason to believe that the employee will be chargeable at the higher rate on all or a substantial part of the employee's relevant payments.

    (2) The Inland Revenue may determine that the code for use by an employer in respect of an employee for a tax year is the basic rate code, if they have reason to believe that the employee will be chargeable at the basic rate on all or a substantial part of the employee's relevant payments.

    (3) The Inland Revenue may determine that the code for use by an employer in respect of an employee for a tax year is the nil tax code, if -

    (4) References in this regulation to an employee's relevant payments, PAYE income and income are references to the payments or income in respect of which the employee's code is being determined for the purposes of the employment in question.

Continued application of employee's code
    16. - (1) If the Inland Revenue determine that the code for use by an employer in respect of an employee for a tax year remains the same as at the previous 5th April, the Inland Revenue need not issue a code to the employer.

    (2) If for any tax year the employer does not receive a code for an employee who was in that employer's employment on the previous 5th April, the code which applied on that date is treated as having been issued by the Inland Revenue for the tax year in question.

Notice to employee of code
    17. - (1) The Inland Revenue must give notice to an employee of the code which they have determined for use in respect of that employee for any tax year.

    (2) But notice need not be given if -

Appeals and amendment

Objections and appeals against employee's code
    18. - (1) An employee who objects to the determination of a code must state the grounds of objection.

    (2) On receiving the notice of objection the Inland Revenue may amend the determination of the code by agreement with the employee.

    (3) If the Inland Revenue and employee do not reach agreement, the employee may appeal to the General Commissioners against the determination of the code by giving notice to the Inland Revenue.

    (4) On appeal, the General Commissioners must determine the code in accordance with these Regulations.

    (5) For the purposes of paragraph 3(1)(a) of Schedule 3 to TMA[25] (rules for assigning proceedings to General Commissioners), the relevant place for an appeal under this regulation is -

Amendment of code
    19. - (1) Paragraph (2) applies if the code for use by an employer in respect of an employee is found to be inappropriate because the actual circumstances are different from the circumstances by reference to which it was determined, whether by the Inland Revenue or the General Commissioners.

    (2) The Inland Revenue may, and if required by the employee must, amend the code by reference to the actual circumstances.

    (3) The Inland Revenue must give notice of the amended code to the employee by the date on which the notice under regulation 20(1) is issued to the employer.

    (4) But notice need not be given where the change in the code is solely because of an alteration or proposed alteration in the rates of any of the personal reliefs allowable under sections 257 and 257A of ICTA (personal allowance and married couple's allowance) or in the tax tables.

    (5) Regulation 18 (objections and appeals) applies in relation to the amended code as it applies in relation to the original code.

    (6) Regulation 18 also applies if the Inland Revenue do not agree that the circumstances have changed and so refuse to amend the code in accordance with paragraph (2).

Notice to employer of amended code
    20. - (1) If the code for use by an employer in respect of an employee is amended after notice of it has been issued to the employer, the Inland Revenue must issue the amended code to the employer.

    (2) An amended code is issued to an employer if it is contained in a document that is sent to the employer or a person acting on behalf of the employer by the Inland Revenue, and any code so issued is received by the employer for the purposes of these Regulations.

    (3) On making any subsequent relevant payment to the employee, the employer must deduct or repay tax by reference to the amended code.

    (4) Paragraphs (5) and (6) apply if there is a change or proposed change in the rates of any of the personal reliefs allowable under sections 257 and 257A of ICTA (personal allowance and married couple's allowance).

    (5) If the change or proposed change relates to the current tax year, the Inland Revenue may give notice requiring the employer, with effect from the date specified in the notice, to amend specified codes as directed.

    (6) If the change relates to the following tax year, the Inland Revenue may give notice requiring the employer to carry forward to the following tax year specified codes of the current tax year and adjust them as directed in the notice.

    (7) A code which has -

is treated as having been determined and issued by the Inland Revenue as the employee's code for that tax year.

(8) A notice under paragraphs (5) and (6) may be issued to the employer or to a person acting on behalf of the employer.

PART 3
DEDUCTION AND REPAYMENT OF TAX

CHAPTER 1
DEDUCTION AND REPAYMENT
Deduction and repayment by reference to employee's code
Deduction and repayment of tax by reference to employee's code
    21. - (1) On making a relevant payment to an employee during a tax year, an employer must deduct or repay tax in accordance with these Regulations by reference to the employee's code, if the employer has one for the employee.

    (2) The employer must deduct or repay tax by reference to the employee's code, even if the code is the subject of an objection or appeal.

The cumulative basis
The cumulative basis
    22.An employer must deduct or repay tax on the cumulative basis, unless these Regulations provide otherwise.

Cumulative basis: deduction and repayment
    23. - (1) This regulation provides for deductions and repayments on the basis of total payments to date (the cumulative basis).

    (2) In this regulation -

    (3) The employer must, before making any relevant payment to the employee, calculate TT.

    (4) If TT + UT exceeds PT, the employer must deduct the excess from the relevant payment on making the payment.

    (5) But if the employee's code is a K code, the deduction is not to exceed the overriding limit, subject to 62(6) (notional payments).

    (6) If TT + UT is less than PT, the employer must repay the difference to the employee on making the payment, subject to regulations 25(4) (extra payment made before main payment) and 64 (trade disputes).

    (7) If TT + UT equals PT, the employer must neither deduct nor repay tax when making the payment.

    (8) "Previous total tax to date" means the total tax to date corresponding to the employee's total payments to date and the employee's code -

(9) But -

"previous total tax to date" means the total net tax deducted by the employer.

(10) Paragraphs (2)(c), (8) and (9) are subject to regulations 43(9) and (10), 52(11) and (12), 53(4) and 61(4) (which modify the meaning of previous total tax to date in certain circumstances).

Cumulative basis: employee not paid weekly or monthly
24. - (1) This regulation applies if -

(2) The first main relevant payment in a tax year is treated for the purposes of calculating the deduction or repayment of tax as having been made at the end the period which -

(3) Subsequent main relevant payments in the tax year are treated for the purposes of calculating the deduction or repayment of tax as having been made at the end of the period which -

    (4) If the employee's main relevant payments are normally made at regular intervals which are longer than a year, any such payment in a tax year is treated, for the purposes of calculating the deduction or repayment of tax, as made on the last day of that tax year.

    (5) But, in every case, the employer must record the actual date of every payment in the deductions working sheet.

    (6) This regulation does not apply if the payment falls within regulation 31(1) (payments in short payment periods).

Cumulative basis: subsidiary PAYE income of employee paid weekly or at greater intervals
    25. - (1) This regulation applies if -

    (2) For the purposes of calculating the deduction or repayment of tax, the extra payment is treated as made on the same date as that on which the main relevant payment in the payment period is due to be paid or is due to be treated as paid by regulation 24 (employee not paid weekly or monthly).

    (3) But paragraph (4) applies if the extra payment is actually made before the date on which the main relevant payment in the payment period is due to be paid (disregarding the effects of regulation 24).

    (4) A repayment which would (but for this paragraph) be due under regulation 23(6) on making the extra payment must not be paid to the employee, but must instead be added to the previous total tax (as defined by regulation 23(8)) on making the next relevant payment.

    (5) This regulation does not apply if the extra payment is made in a short payment period (but regulation 31 applies instead if that period contains an extra pay day).

    (6) "Payment period" -

(7) In the case mentioned in paragraph (6)(c) -

(8) "Short payment period" means the last payment period in a tax year if, because of paragraph (7)(b)(ii), it is shorter than the previous payment periods.

(9) "Extra pay day" has the meaning given in regulation 31(4).

The non-cumulative basis
The non-cumulative basis
26. - (1) An employer must deduct tax in accordance with regulation 27 (the non-cumulative basis) from any relevant payment made to an employee if -

that the non-cumulative basis is to apply.

    (2) If this regulation applies then regulation 22 (cumulative basis) does not apply.

Non-cumulative basis: general rule for deductions
    27. - (1) On making a relevant payment, the employer must deduct the amount of tax which would have been deductible in accordance with the appropriate tax tables, by reference to the employee's code, if the payment had been made on the first day of the tax year.

    (2) This is subject to -

regulation 28	modification of general rule
regulation 29	aggregation of payments.

Non-cumulative basis: modification of general rule
    28. - (1) Paragraphs (2) to (5) modify the general rule in regulation 27(1) (the non-cumulative basis) in certain circumstances.

    (2) If regulation 30 (employee not paid weekly or monthly) applies to the employee's main relevant payments, the employer must deduct from a relevant payment the amount of tax which would have been deductible, by reference to the employee's code, if the payment (whether or not it is a main relevant payment) had been made on the date given by that regulation.

    (3) If the employer does not normally make relevant payments to the employee at regular intervals, the employer must deduct from a relevant payment the amount of tax which would have been deductible, by reference to the employee's code -

    (4) But if two or more relevant payments are made in the same tax week, the employer must deduct from the second or subsequent relevant payment the amount of tax which (subject to regulation 29(5)) would have been deductible, by reference to the employee's code, if that payment were made at the date given by paragraph (3) for the first payment.

    (5) If the employee's code is a K code, the deduction is not to exceed the overriding limit, subject to regulation 62(6) (notional payments).

Non-cumulative basis: aggregation of payments
    29. - (1) Paragraph (2) applies if -

(2) If the relevant payment is the second or subsequent relevant payment made to the employee during the payment period (as defined by regulation 25(6)), the amount of tax to be deducted must be -

(3) But, for the purposes of the aggregate, any effects of regulation 30(2) (regular payments treated as made at later date) must be disregarded.

(4) Paragraph (5) applies if relevant payments to an employee -

(5) If the relevant payment is the second or subsequent relevant payment made to the employee during a tax week, the amount of tax to be deducted must be -

Non-cumulative basis: employee not paid weekly or monthly
30. - (1) This regulation applies if -

(2) Each main relevant payment in a tax year is treated for the purposes of calculating the deduction of tax as having been made at the end the period which -

    (3) If the employee's main relevant payments are normally made at regular intervals which are longer than a year, any such payment in a tax year is treated, for the purposes of calculating the deduction of tax, as made on 5th April in that tax year.

    (4) But, in every case, the employer must record the actual date of every payment in the deductions working sheet.

Payments in short payment periods
    31. - (1) An employer must deduct tax on the non-cumulative basis from any relevant payment made to an employee in a short payment period which includes an extra pay day, even if the employee's code is normally used on the cumulative basis.

    (2) Paragraph (1) does not apply if the employee's code is the basic rate code.

    (3) If -

the employer must not deduct any tax from relevant payments made in a short payment period which includes an extra pay day.

(4) "Extra pay day" means the last day in a tax year on which a main relevant payment is due to be made to an employee if -

(5) "Short payment period" has the meaning given in regulation 25(8).

Higher rate and nil tax codes
Higher rate code: deductions
    32.If an employee's code is the higher rate code the employer must deduct tax at the higher rate, and regulations 22 and 26 (cumulative and non-cumulative basis) do not apply.

Nil tax code: no deductions or repayments
    33. - (1) If an employee's code is the nil tax code the employer must not deduct or repay any tax, and so regulation 22 (cumulative basis) does not apply.

    (2) But -

regulation 22 applies to the next relevant payment the employer makes in the same tax year, and the employer must make any repayment of tax due.

Simplified deduction scheme
Simplified deduction scheme for personal employees
34. - (1) The Inland Revenue may authorise the employer of a personal employee to deduct tax from each relevant payment made to the employee by reference to the appropriate taxable payments in the simplified tax tables.

(2) The amount of tax to be deducted must be -

(3) In this regulation -

"payment period" means the interval for which free pay is calculated shown on the deductions working sheet issued in accordance with regulation 35(3);

"personal employee" means -

and "authorised personal employee" means a personal employee in respect of whom an authorisation under paragraph (1) is in force;

"simplified tax tables" means the parts of the tax tables which are prepared by the Board of Inland Revenue for use under this regulation.

(4) The following regulations do not apply to cases in which this regulation and regulation 35 apply -

regulation 15	flat rate codes
regulation 16	continued application of employee's code
regulation 21	deduction and repayment of tax by reference to employee's code
regulations 22 to 25	cumulative basis
regulations 26 to 31	non-cumulative basis
regulations 32 and 33	higher rate and nil tax codes
regulation 36	cessation of employment: Form P45
regulations 42 to 45	employer to complete Form P45
regulation 55	PAYE pension income paid by former employer
regulation 66	deductions working sheets.

Simplified deduction schemes: records
35. - (1) The employer must maintain the following records in relation to an authorised personal employee.

(2) The records are -

    (3) The employer must maintain the records in a deductions working sheet which has been issued by the Inland Revenue showing the code for use by the employer in respect of the employee for the tax year.

    (4) On ceasing to employ an authorised personal employee, the employer must return the completed deductions working sheet in respect of that employee to the Inland Revenue.

    (5) Before 20th May following the end of a tax year, an employer who, at the end of that tax year, was employing one or more authorised personal employees must send to the Inland Revenue -

(6) The employer must declare and certify in the return -

(7) The return is treated for the purposes of these Regulations as the return required by regulation 73(1) (annual return of relevant payments liable to deduction of tax).

(8) "Personal employee" and "authorised personal employee" have the same meaning as in regulation 34.

Cessation of employment
Cessation of employment: Form P45
36. - (1) On ceasing to employ an employee in respect of whom a code has been issued, the employer must complete Form P45.

(2) The employer must then -

on the day on which the employment ceases or, if that is not practicable, without unreasonable delay.

(3) Retirement on pension is not a cessation of employment for the purposes of this regulation if the PAYE pension income is paid by the same employer after retirement.

(4) The information listed in column 1 of Table 2 must, subject to the conditions set out in column 2, be provided in the various Parts of Form P45 as indicated in columns 3 to 5.

Table 2Information which must be provided in Form P45

1.	2.	3-5.
Information to be provided	Conditions	Form P45 Part
		1	1A	2, 3
1.the employer's PAYE reference		yes	yes	yes
2.the employee's national insurance number	if known	yes	yes	yes
3.the employee's name		yes	yes	yes
4.the date on which the employment ceased		yes	yes	yes
5.the employee's code or, if more than one, the latest code, issued by the Inland Revenue for the tax year during which the employment ceased		yes	yes	yes
6.whether the employee's code is used on the cumulative basis		yes	yes	yes
7.the tax week or month in which the last relevant payment was made to the employee or, in a case falling within regulation 24, was treated as having been made	if the employee's code is used on the cumulative basis	yes	yes	yes
8.the total payments to date and the corresponding total net tax deducted	if the employee's code is used on the cumulative basis	yes	yes	yes
9.the total payments to date relating to the employment in question and the corresponding total net tax deducted	if the employee's code is used on the cumulative basis, and if different from the information supplied under item 8	yes	yes	no
10.the total payments to date relating to the employment in question and the corresponding total net tax deducted	if the employee's code is not used on the cumulative basis	yes	yes	no
11.the number used by the employer to identify the employee	if any	yes	no	no
12.the department or branch in which the employee was employed	if any	yes	no	no
13.the employee's address	if known	yes	no	no
14.the employer's name		yes	yes	no
15.the employer's address		yes	yes	no
16.the date the Form is completed		yes	yes	no

(5) This regulation is subject to regulations 38, 39 and 180 (death of employee etc).

PAYE income paid after employment ceased
37. - (1) This regulation applies if a relevant payment is made to an employee after the employment has ceased -

and the payment has not been included in Form P45.

(2) The person making the payment must deduct tax at the basic rate in force for the tax year in which the payment is made.

(3) But -

(4) The provisions are -

regulation 21	deduction and repayment of tax by reference to employee's code
regulations 22 and 23	cumulative basis
regulations 26 and 27	non-cumulative basis
Chapters 2 and 3 of this Part	new employees and new pensioners: Forms P45 and P46.

(5) The person making the payment must record the following information in a deductions working sheet (which the person must prepare for the purpose if one has not already been prepared for that tax year).

(6) The information is -

(7) The person making the payment must also notify the employee of the information mentioned in paragraph (6) without unreasonable delay.

Death of employee
38. - (1) On the death of an employee (other than a pensioner) in respect of whom a code has been issued by the Inland Revenue, the employer must -

(2) The employer must comply with paragraph (1) -

(3) The employer must, on making a relevant payment after learning of the employee's death but before completing Form P45, deduct or repay tax as if the deceased employee were still alive and employed by the employer at the date of the payment.

(4) Regulation 37(2) to (6) applies to any relevant payment which -

Death of pensioner
39. - (1) On the death of a pensioner in respect of whom a code has been issued by the Inland Revenue, the pension payer must -

(2) The pension payer must comply with paragraph (1) -

(3) Paragraph (4) applies if the pension payer makes any relevant pension payments after the date of the pensioner's death -

(4) The pension payer must, on making any such payment, deduct or repay tax as if the deceased pensioner were still alive and in receipt of a pension at the date of the payment.

(5) Regulation 37(2) to (6) applies to any relevant pension payment which -

Employee's duty to provide Form P45

Duty of employee to give new employer Form P45
    40. - (1) An employee who has Parts 2 and 3 of Form P45 must give them to the new employer on commencing a new employment.

    (2) If an employee receives Parts 2 and 3 of Form P45 after commencing a new employment, the employee must immediately give them to the new employer.

    (3) But paragraph (4) applies if an employee objects to the disclosure of the total payments to date to the new employer.

    (4) The employee may, instead of complying with paragraph (1) or (2), send Parts 2 and 3 of Form P45 to the Inland Revenue before commencing the new employment or as soon as the employee receives Form P45 (as the case may be).

    (5) The Inland Revenue -

CHAPTER 2
NEW EMPLOYEES (OTHER THAN PENSIONERS): FORMS P45 AND P46
Scope of Chapter 2
41.This Chapter sets out the procedure to be followed for deductions and repayments (Form P45 and P46 procedure) in cases to which Chapter 3 (new pensioners: Forms P45 and P46) does not apply (see regulation 54).

Procedure if employer receives Form P45
42. - (1) This regulation applies -

(2) The new employer must prepare a deductions working sheet and record on it the following information shown in Parts 2 and 3 of Form P45 -

(3) If Parts 2 and 3 of Form P45 show that the earlier employment ended in the current tax year, the new employer must comply with regulation 43.

(4) If -

the new employer must comply with regulation 44.

(5) If -

the new employer must comply with regulation 45.

(6) If Parts 2 and 3 of Form P45 show that the employment ended in any earlier tax year, the new employer must comply with regulation 45.

(7) In all cases the new employer must then insert in Part 3 of Form P45 -

    (8) The employer must then send Part 3 of Form P45 to the employer's Inland Revenue office.

Form P45 for current tax year
    43. - (1) The new employer must record in the deductions working sheet the code shown in Parts 2 and 3 of Form P45 as the employee's code.

    (2) Paragraphs (3) to (10) apply if Parts 2 and 3 of Form P45 show that the cumulative basis was used.

    (3) The employer must record in the deductions working sheet the total payments to date (if any) shown in Parts 2 and 3 of Form P45.

    (4) The employer must record in the deductions working sheet the following additional information, or keep such records as enable its production.

    (5) If the code shown in Parts 2 and 3 of Form P45 is a K code, the additional information is -

(6) In any other case, the additional information is -

    (7) The amounts required by paragraphs (5)(a) and (b) and (6)(a) and (b) must be arrived at by the employer by reference to the information shown in Parts 2 and 3 of Form P45.

    (8) On making any relevant payment to the employee, the employer must deduct or repay tax by reference to the employee's code on the cumulative basis.

    (9) For the purposes of -

the total payments to date recorded in the deductions working sheet in accordance with paragraph (3), and the figure recorded in accordance with paragraph (5)(c) or (6)(c) must be treated as if they were relevant payments made to the employee by, and tax deducted by, the new employer.

    (10) For the purposes of regulation 23(8) (cumulative basis: meaning of previous total tax to date) the figure recorded in accordance with paragraph (5)(c) or (6)(c) must be treated as the previous total tax to date when the employer next makes a relevant payment to the employee.

    (11) If Parts 2 and 3 of Form P45 show that the non-cumulative basis has been used, on making any relevant payment to the employee the employer must, subject to regulation 32 (higher rate code: deductions), deduct or repay tax by reference to the employee's code on the non-cumulative basis.

    (12) The receipt by the employer