The Income Tax (Pay As You Earn) (Amendment) Regulations 2013

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the Income Tax (Pay as You Earn) Regulations 2003 (S.I. 2003/2682) (“the principal Regulations”) which make provision for the assessment, charge, collection and recovery of income tax in respect of all pay as you earn (“PAYE”) income.

Part 2 of these Regulations amends the principal Regulations to allow Her Majesty’s Revenue and Customs (“HMRC”) to use PAYE coding to collect the new high income child benefit charge. That charge was inserted into Part 10 of the Income Tax (Earning and Pensions) Act 2003 (c. 1) by section 8 and paragraph 5(4) of Schedule 1 to the Finance Act 2012 (c. 14).

Part 3 of these Regulations amends the principal Regulations as a consequence of the closure of the simplified deduction scheme for personal employers (“the Scheme”) which was closed to new employers by virtue of the amendments made to regulation 34 of the principal Regulations by regulation 64(a) of the Income Tax (Pay As You Earn) (Amendment) Regulations 2012 (S.I. 2012/822). Regulation 4 of these Regulations amends regulation 34 of the principal Regulations with the effect that the scheme is closed to all employers, other than care and support employers (as defined by regulation 67D(10) of the principal Regulations) from 6th April 2013. Regulation 5 closes the Scheme altogether with effect from tax year 2014-15. Regulations 6 to 11 make further amendments to the principal Regulations as a consequence of the closure of the Scheme.

Part 4 of these Regulations make provision for relevant lump sum payments (which term is defined in regulation 58(7) of the principal Regulations, now inserted). Regulation 12 amends regulation 58 of the principal Regulations so that that regulation no longer applies where the payment is a relevant lump sum payment and the pension payer does not know which code is to be applied to the payment and the pension scheme is not already in payment. Regulation 13 inserts a new regulation 58A into the principal Regulations which changes the code that is applied to relevant lump sum payments to pensioners in cases where the pension payer is unaware of the code to be applied to the payment. The pension payer is no longer required to apply the emergency code on the non-cumulative (week 1/month1) basis, but the basic rate code (also applied on the non-cumulative basis).

Part 5 of these Regulations amends the principal Regulations to make further provision in relation to the provision of Real Time Information (“RTI”) to the Commissioners for Her Majesty’s Revenue and Customs (“HMRC”) on or before the making of a payment to an employee.

Regulation 14 amends the definition of an RTI employer in regulation 2A to exclude certain employers from becoming RTI employers on 6th April 2013.

Regulation 15 makes a similar amendment to the definition of an RTI pension payer in regulation 2B of the principal Regulations.

Regulation 16 amends regulation 36 of the principal Regulations to make provision for the situation where Part 3 of Form 45 is not available to an employer.

Regulation 17 amends regulation 46(2) of the principal Regulations to take into account the introduction of employment and support allowance and to amend the periods of time set out in Statements A, B and C, referred to in that regulation, one of which must be given by an employee who is a seconded expatriate.

Regulation 18 makes a consequential amendment to regulation 67B of the principal Regulations following the insertion of new regulation 67EA into the principal Regulations (by regulation 21 of these Regulations). Regulation 67B(6) and (7) made provision for a penalty to be charged if the return containing information about the final payment for the tax year 2012-13 was not delivered.

Regulation 19 inserts new regulations 67BA, 67BB and 67BC into the principal Regulations. Regulations 67BA and 67BB make provision for exceptions from the requirement in regulation 67B to deliver information on or before the making of a payment. Where regulations 67BA and 67BB apply the employer is required to deliver the information by the end of a period of seven days beginning with the day after the day on which the payment is made. Regulation 67BC makes provision for including such information in a return in respect of any other relevant payment.

Regulation 20 amends regulation 67C of the principle Regulations to require an employer who makes a notional payment to deliver information regarding the payment no later than 14 days after the end of the tax month in which the payment is made.

Regulation 21 amends regulation 67D of the principal Regulations to extend the time limit and the categories of employers who are not required to deliver information regarding a payment on or before making a payment to an employee. The employers specified in regulation 67D(1), which includes those employers whom HMRC has directed are unable to file using an approved method of electronic communications, are for the tax year 2013-14 entitled to file in accordance with the provisions in the principal Regulations which do not relate to Real Time Information employers.

Regulation 22 makes consequential amendments to regulation 67E to expand the information that an employer must provide when making a return which includes details of information omitted from an earlier return.

Regulation 23 inserts new regulation 67EA into the principal Regulations to make provision for the situation where an employer has failed to make a return of information. Regulation 67EA requires the employer to provide the information in the next return made under regulation 67B or 67D of the principal Regulations for the tax year in question. If by 20th April following the tax year the information has not been included in such a return, the employer is required to report the information under regulation 67EA(3). Regulation 67EA(5) makes provision for section 98A of the Taxes Management Act 1970 (c. 1) to apply if the return has not been made before 20th May following the end of the tax year to which the information relates. As a consequence of new regulation 67EA(5) an employer who has not reported all the payments (either under regulation 67B or 67D or under regulation 67EA(3) before 20th April or under regulation 67EA(5) on or after 20th April but before 20th May following the tax year) could be liable to a penalty.

Regulation 24 amends regulation 67F(2) of the principal Regulations to make provision for an employer to notify the date of cessation of a PAYE scheme.

Regulation 25 amends regulation 67G of the principal Regulations to make provision for the situation where an employer has failed to make a return during the tax year. As a consequence of the amendment, where an employer makes a return under regulation 67EA(3) after 19th April following the tax year in question, the relevant amount in the definition of A in the formula in paragraph (4) is the amount shown in that return.

Regulation 26 amends regulation 67H of the principal Regulations to make provision for a return sent to HMRC after 19th April to be treated as if it were sent in respect of the final tax period of the tax year to which it applies.

Regulations 27 to 36 make consequential amendments to the principal Regulations following the amendment made by regulation 26 of these Regulations.

Regulation 37 amends Schedule AI to the principal Regulations in respect of the data that employers are required to include on a return to HMRC when making a relevant payment to an employee.

Part 6 of these Regulations amends Income Tax (Pay As You Earn) (Amendment) Regulations 2012 (S.I. 21012/822) in consequence of the changes being made to the principal Regulations. Regulations 39 and 40 include new data items to be submitted by employers who become a Real Time Employer on or after 6th April 2013.

A Tax Information and Impact Note covering Part 2 of this instrument was published on 21st March 2012 alongside clause 8 and Schedule 1 to the Finance (No. 4) Bill 2012 and is available on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm. It remains an accurate summary of the impacts that apply to this instrument.

A Tax Information and Impact Note covering Part 3 of this instrument was published on 15th March 2012 alongside the Income Tax (Pay As You Earn) (Amendment) Regulations 2012 and is available on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm. It remains an accurate summary of the impacts that apply to this instrument.

A Tax Information and Impact Note covering Parts 4 and 6 of this instrument was published on 16th November 2012 alongside the draft legislation and is available on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm. It remains an accurate summary of the impacts that apply to this instrument.

A Tax Information and Impact Notes covering Part 5 of this instrument was published on 15th March 2012 alongside the Income Tax (Pay As You Earn) (Amendment) Regulations 2012 (S. I. 2012/822). This has been updated as a result of changes to the impacts as a result of the year long RTI pilot and is available on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm.