Income Tax (Earnings and Pensions) Act 2003 section 687

Payments by intermediary

Section 687 sets out the rules that apply when a third party (an intermediary) makes payments of PAYE income to an employee on behalf of an employer, ensuring that PAYE obligations cannot be avoided by routing payments through someone else.

• When an intermediary pays PAYE income to an employee, the employer is treated as having made that payment for PAYE purposes, and must account for PAYE accordingly
• If the intermediary itself properly deducts income tax and any relevant debts and accounts for them under PAYE regulations, the employer is relieved of this obligation
• The amount the employer is treated as paying is either the gross amount (i.e. the net payment plus the tax and debts that should have been deducted) or simply the payment amount, depending on whether the intermediary paid a net or gross figure
• An intermediary includes anyone acting on behalf of the employer and funded by the employer or a connected person, as well as trustees holding property for a class of beneficiaries that includes the employee