SE71318 - Tax treatment of payments under Working Rule agreements : SA return and forms P9D and P11D

SA returns

Some payments made under WRAs are subject to PAYE by the employer and should appear on year end PAYE returns, such as the P60. If the employee is required to submit a SA return he should include the figures from the P60, including the WRA payments, in the Employment Pages of the return.

Payments made free of tax under the terms of a WRA do not need to be returned unless the employee requests a deduction for the same type of expense under Section 198 ICTA 1988 ( SE71305). In this event any expense payments made by an employer which relate to the same type of expense for which the employee is seeking a deduction must be returned in Box 1.23 of the Employment Pages of the SA return.

Forms P9D and P11D

For lower-paid employees, amounts of travelling and lodging allowances payable free of tax under the national arrangements are not regarded as 'pay' for tax purposes, and need not be returned by employers on forms P9D.

For employees within Part V Chapter II ICTA 1988 all payments of travelling and lodging, etc. allowances under Working Rule agreements should be taken into account for threshold purposes in determining whether or not forms P11D should be submitted. However, such payments need not be returned on forms P11D where they are made without deduction of tax under the national arrangements.

Such payments may not be appropriate for inclusion in a formal dispensation ( SE30051 onwards) as the underlying expenses may not fall within the strict terms of Section 198 (1) ( SE31610 onwards). You may nevertheless give appropriate written authority to employers, when required, not to deduct tax from Working Rule agreement allowances under the national arrangements.