Income Tax (Earnings and Pensions) Act 2003 section 687A

Payment of employment income under Part 7A

Section 687A makes the employer responsible for operating PAYE when a third party pays a sum of money to an employee and that payment counts as employment income under the disguised remuneration rules in Part 7A.

• Where a relevant step involving a money payment counts as employment income under Part 7A, the employer (B) is treated as making a payment of PAYE income to the employee (A), based on the best reasonable estimate of the employment income amount.
• The payment is treated as made on whichever is the latest of: the date the relevant step is taken, the date the employee's employment begins, or 30 days after the Finance Act 2011 was passed.
• The employer does not need to operate PAYE if the third party that actually made the payment has already deducted income tax and accounted for it under PAYE regulations.
• This ensures that where a third party pays money to or for an employee as part of a disguised remuneration arrangement, PAYE obligations fall on the employer unless the third party has already dealt with the tax.