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Income Tax (Earnings and Pensions) Act 2003

Section 686: Meaning of “payment”

2759.This section deals with the meaning of “payment” in this Part. It derives from section 203A and part of section 202B of ICTA.

2760.Section 203A was introduced in 1989 as part of the package of changes dealing with the switch to a receipts basis of assessment. Prior to 1989 income under Cases I and II of Schedule E was assessed on an arising basis, whereas PAYE deductions were made when the emoluments were paid. The 1989 reforms made the emoluments assessable at the same time that they were paid for PAYE purposes. They provided :

  • a definition of receipt in section 202B of ICTA to determine the time that emoluments were assessable, and

  • a definition of payment in section 203A of ICTA.

2761.These definitions are essentially the same. This section therefore matches section 18, which derives from section 202B.

2762.In consultation leading up to this Act some users said that the heading of the section was inappropriate because it deals only with the timing of a payment. The section reproduces the heading from section 203A. It is on close examination appropriate. Section 203A and this section are not only giving the time of a payment. They also make some things which would not be payments into payments for PAYE purposes. A simple example is where an employee is entitled to collect a bonus of £1,000 on Monday. That is a payment for PAYE purposes on Monday even if the employee does not get around to collecting the money until later.

2763.Subsection (1) provides that for the purposes of the PAYE regulations, any payment of (or on account of) PAYE income is a payment for PAYE purposes at the earliest time given by any of the dates derived from the rules given.

2764.Rule 3 derives from section 203A(2), and Rule 3(a) from section 203A(4).

2765.Subsection (2) provides that a person is treated as a director for the purposes of rule 3 in subsection (1) if he or she is a director at any time during the tax year.

2766.Subsections (3) and (4) derive from section 203A(5), and from section 202B(5) and (6). In section 203A(5) reference is made to the definition of director in section 202B(5) and (6). It is more helpful to readers to repeat the definition here.

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