An employer (having the extended meaning described in E4.1103) is required to operate PAYE when they make a relevant payment to an employee (see E4.1108)1. This does not apply to benefits in kind, which are not relevant payments and the tax in respect of which is dealt with by adjusting the employee's code. However, PAYE is applied to certain specified notional payments (see E4.1120–E4.1128)2.
Net PAYE income (and therefore a relevant payment) is arrived at after deduction of allowable pension contributions (see E7.232) and allowable 'payroll giving' donations to charity (see E4.1114). Note that income for NIC purposes is the amount of income before any such deduction for allowable pension contributions or payroll giving (pension contributions paid by means of a valid salary sacrifice, see E4.601B, are likely to be an exception to this rule).
Payments in respect of expenses—PAYE treatment
A payment to an employee in respect of expenses represents PAYE income, and if it is a round sum it must be subject to deduction of PAYE and NIC3.
To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to Tolley+™ Research or register for a free trial
Web page updated on 17 Mar 2025 16:24