Income Tax (Earnings and Pensions) Act 2003 section 222

Payments by employer on account of tax where deduction not possible

Section 222 deals with situations where an employer is treated as having made a "notional payment" of income to an employee — typically where remuneration is provided in a non-cash form such as a readily convertible asset — and the employer cannot deduct PAYE tax directly from that payment, so must account for the tax separately. If the employee does not reimburse the employer for that tax, the unreimbursed amount becomes an additional taxable earnings charge on the employee.

• When an employer is deemed to have made a "notional payment" (for example, providing a readily convertible asset instead of cash), PAYE rules apply and the employer must account to HMRC for the income tax due on that payment
• If the employee does not reimburse the employer for the tax due within 90 days after the end of the tax year in which the relevant date falls, the unpaid tax amount is treated as additional taxable earnings of the employee for that tax year
• The definition of "employer" is broad and includes not only the actual employer but also any person treated as the employer under the relevant PAYE provisions, including a person for whom the employee works who is not technically the employer, or a person deemed to make payments to continental shelf workers
• The "relevant date" is normally the date on which the employer is treated as making the notional payment, but where legislation retrospectively deems the payment to have been made before the Act was passed, the relevant date is instead the date the Act received Royal Assent