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Income Tax (Earnings and Pensions) Act 2003

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Part 12: Payroll giving

2898.The next three sections describe the circumstances in which a deduction may be available for charitable giving via the payroll. They derive from the provisions in section 202 of ICTA.

Section 713: Donations to charity: payroll deduction scheme

2899.This section describes the arrangements between the person it characterises as “the payer” and the individual from whose PAYE income that payer withholds the donations. The section derives from section 202(1) and (2) and part of (5) of ICTA.

2900.Subsection (1) sets out the basic circumstances for payroll giving to be possible. An individual asks the person making payments of PAYE income to him or her to deduct authorised charitable donations from those payments. Tax relief is available on the donations made.

2901.Subsection (2) removes the possibility of circularity in the operation of this section.

2902.Section 202(2) provides that the donations “ … shall … be allowed to be deducted as expenses incurred in the year of assessment in which they are withheld”. Under the structure of this Act, the amounts that are withheld do not need to be characterised as “expenses”. Subsections (3) and (4) simply refer to a deduction being allowed in calculating the amount of the individual’s income that is charged to tax. The particular manner of that deduction depends on the type of income from which the amount is withheld and is described in subsection (4). Those provisions refer to deductions being allowed in calculating “net taxable” earnings/income of the specified type for “the relevant tax year”. That fixes the tax year in which the deduction is due to that in which the income (from which the amount is withheld) is charged to tax. See Change 154 in Annex 1.

2903.Subsection (5) defines “relevant tax year” for the purposes of parts of the preceding subsection.

Section 714: Meaning of “donations”

2904.This section defines what is meant by “donations”. It also records the meanings of supporting terms that are used in that definition. The section derives from section 202(3), (4), (5), (6) and (11) of ICTA.

2905.Subsection (1) contains the definition of “donations”, where two (or possibly three) requirements that need to be fulfilled are identified.

2906.Subsection (2) contains definitions of three terms used in the preceding subsection.

2907.Section 202(4)(a) of ICTA refers to “a person (“the agent”)”, although that term is not further defined there. The Act recognises the reality that the agent will be a “body”. See Change 155 in Annex 1.

2908.This Act provides for the Inland Revenue, as opposed to the Board in the source legislation, to approve a scheme for payroll giving. See Change 158 in Annex 1.

2909.Subsection (3) provides for the Inland Revenue, as opposed to the Board in the source legislation, to approve an agent for payroll giving. That reflects the Inland Revenue’s practice on the application of section 202(3) whereby the power of the Board is delegated to the technical specialist. See Change 158 in Annex 1.

Section 715: Approval of schemes: regulation by Treasury

2910.This section describes the powers reserved for the Treasury to regulate certain matters relating to payroll giving. It derives from section 202(8), (9) and (10) of ICTA.

2911.Subsection (1) provides for the Treasury to make regulations governing how the Inland Revenue, as opposed to the Board in the source legislation, grant or withdraw approval of a scheme or agent. See Change 158 in Annex 1.

2912.Section 202(9)(a) refers to a notice “served on” a participating employer or agent by the Board. Subsection (3)(a)(i) instead refers to a notice the Inland Revenue “give to” such an employer or agent. See Changes 156 and 158 in Annex 1.

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