Income Tax (PAYE) Regulations 2003 – SI 2003 No
Part 6 (Regulations 105 – 117)
PAYE SETTLEMENT AGREEMENTS
Making and effect of PSA
Inland Revenue and employer may make PSA
105 - (1) The Inland Revenue and an employer may agree that paragraph (2) applies in respect of income tax on qualifying general earnings of the employer’s employees for a tax year.
(2) In relation to qualifying general earnings included in the agreement, the employer is:
(3) Such an agreement is referred to as a PAYE settlement
Qualifying general earnings
106 – (1) Qualifying general earnings are those general earnings which meet conditions A and B.
(2) Condition A is that the general earnings consist of;
(3) Condition B is that the employer and the Inland Revenue agree that the general earnings are;
(4) “Taxable benefit”, in relation to an employee,
means any benefit provided or made available, other 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.
(5) General earnings to which regulation 112(2)(a) or (b) (pre-agreement general earnings etc) apply are not qualifying general earnings.
Effect of PSA
107.(1) Qualifying general earnings included in the PSA are treated as excluded from an employee’s income for the purposes of determining the amount of the employee’s liability to income tax for the tax year to which the PSA relates.
(2) But this does not affect;
(3) Sums in respect of income tax for which an employer is
accountable to the Board of Inland Revenue under a PSA are not to
be treated, for the purposes of these Regulations, as tax deducted
from relevant payments.
(4) An employee has no right to be treated as having paid tax in respect of sums for which the employer is accountable under a PSA, and accordingly is not entitled to claim or receive any refund of tax paid by the employer under the PSA.
(5) An employee must, subject to paragraph (6), be treated as relieved from any obligations under the Income Tax Acts;
(6) Paragraph (5) does not apply for the purposes of the
obligations imposed on the employer under regulation 117
(inspection of PSA records).
(7) Qualifying general earnings comprised in a PSA are not to be included;
Payment of tax under PSA
Calculation of tax payable under PSA
108. (1) A PSA must provide for the sums in respect of income tax for which an employer is to be accountable to the Board of Inland Revenue under the PSA;
(2) The factors are;
(3) The amounts specified for the purposes of paragraph (1)(b) are;
Payment of tax and recovery proceedings
109. (1) The employer must pay to the Inland Revenue by the due date the aggregate amount for which the employer is accountable to the Board of Inland Revenue under a PSA.
(2) “The due date” means 19th October following the end of the tax year to which the PSA relates.
(3) Part 6 of TMA (collection and recovery) applies to the recovery of the aggregate amount or any part of it (“the amount of tax”) as if it were income tax charged on the employer.
(4) But summary proceedings for the recovery of the amount of tax may be brought in England, Wales or Northern Ireland at any time before the expiry of 12 months beginning with the due date.
(5) Proceedings may be brought for the recovery of the amount of tax without distinguishing the amounts which the employer is liable to pay in respect of each employee under the PSA and without specifying the employees in question.
(6) The amount of tax is one cause of action or one matter of complaint for the purposes of proceedings under sections 65, 66 and 67 of TMA (magistrates’ courts, county courts and inferior courts in Scotland).
Formal determination of tax payable by the employer
110. (1) This regulation applies if it appears to the Inland Revenue that there may be an amount payable under regulation 109(1) for any tax year which has not been paid by the due date (as defined by regulation 109(2)).
(2) The Inland Revenue may determine the amount payable to the best of their judgment.
(3) If a determination is made, the Inland Revenue must serve notice of it on the employer.
(4) A determination under this regulation is subject to Parts 4, 5 and 6 of TMA (assessment, appeals, collection and recovery) as if—
and those Parts of TMA apply accordingly with any necessary
(5) For the purposes of paragraph 3(1)(a) of Schedule 3 to TMA (rules for assigning proceedings to General Commissioners), the relevant place for an appeal against a determination is the place where the determination was made.
Form and commencement of PSA
Form of PSA
111. (1) A PSA must be;
(2) A PSA must incorporate, whether by specification or indirect reference;
Commencement of PSA
112. (1) A PSA may be entered into at any time before 6th July following the end of the tax year for which it is to have effect (“the year in question”).
(2) A PSA entered into after the beginning of the year in question cannot apply to;
Variation of PSA
113. (1) The Inland Revenue and the employer may, by agreement and consistently with the provisions of this Part, vary the terms of a PSA entered into by them.
(2) The agreement must be;
(3) The last date for variation of a PSA is 6th July following
the end of the tax year to which it relates.
Cancellation of PSA
114. (1) The Inland Revenue may cancel a PSA if the employer has seriously or persistently failed;
(2) Cancellation must be effected by notice to the employer.
(3) A cancellation comes into effect from the date of the notice.
(4) If a PSA is cancelled, this Part does not apply to general earnings—
Interest on unpaid tax
115. (1) This regulation applies if an employer has not paid to the Inland Revenue by the due date (as defined by regulation 109(2)) the full amount for which the employer is liable under this Part.
(2) The unpaid amount carries interest at the prescribed rate from the due date until payment (“the interest period”).
(3) Paragraph (2) applies even if the due date is a non-business day as defined by section 92 of the Bills of Exchange Act 1882.
(4) Any change made to the prescribed rate during the interest period applies to the unpaid amount from the date of the change.
(5) Interest is recoverable as if it were an amount payable under the PSA.
(6) “The prescribed rate” means the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 86 of TMA.
Interest on overpaid tax
116. (1) This regulation applies if tax in respect of the tax year to which a PSA relates is repaid to the employer after the due date (as defined by regulation 109(2)).
(2) The tax repaid carries interest at the prescribed rate from the later of;
until the order for the repayment is issued (“the interest
(3) Any change made to the prescribed rate during the interest period applies to the tax repaid from the date of the change.
(4) “The prescribed rate” means the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 824 of ICTA.
Inspection of PSA records
117. (1) An authorised officer may require an employer who has entered into a PSA to produce all PSA records, or such PSA records as may be specified by the authorised officer, for inspection
(2) “PSA records” means all books, documents and other records relating to;
(3) “The prescribed place” means such place in the United Kingdom as the employer and the authorised officer may agree upon, or in the absence of agreement;
(4) The authorised officer may
(5) If any record is removed in accordance with paragraph (4)(b), the authorised officer must provide;
(6) If a lien is claimed on a record produced in accordance with
paragraph (1), the removal of the document under paragraph (4)(b)
is not to be regarded as breaking the lien.
(7) If records are maintained by computer, the person required to make them available for inspection must provide the authorised officer with all facilities necessary for obtaining information from them.
(8) An employer must keep PSA records for not less than 3 years after the end of the most recent tax year to which they relate.