SE12001 - PAYE avoidance: non-cash remuneration before 25 May 1994

Section 203(1) ICTA 1988

Meaning of “payment”

Before 25 May 1994 when Section 203F-L ICTA 1988 took effect, there was no specific legislation to combat schemes involving awards of non-cash remuneration to employees to avoid PAYE and NIC.

Section 203 ICTA 1988 applies to “the making of any payment of, or on account of, any income assessable to income tax under Schedule E” and the PAYE regulations requires an employer to operate PAYE on “any payment of emoluments”.

There was no doubt that an employer providing cash to an employee had made a “payment” but where an employee received assets, the position was less clear.

If there was no entitlement to an equivalent monetary amount, the remuneration often successfully avoided PAYE and was assessed under Section 19 ICTA 1988 on the money’s worth of the assets, or under Section 141 ICTA 1988, where non-cash vouchers were involved.

However, where an employee was legally entitled to remuneration of a monetary amount, and the entitlement was satisfied by the transfer of assets, this was a “payment” under Section 203(1) and PAYE should have been operated (see SE12002).

From 25 May 1994, Sections 203F-L addresses schemes involving payment in non- cash remuneration (see SE12010).