Taxes Management Act 1970 section 106

Refusal to allow a deduction of income tax, and avoidance of agreements for payment without deduction

Section 106 deals with the consequences of refusing to permit authorised income tax deductions from payments, and the invalidity of agreements that attempt to circumvent such deductions.

• Where income tax is required to be deducted at source under the Taxes Acts, the payer must not refuse to allow that deduction
• A penalty of £50 applies to any person who refuses to allow an authorised income tax deduction from a payment
• Any agreement that provides for interest, rent or other annual payments to be made in full without allowing the required tax deduction is automatically void
• The section reinforces the obligation to operate the deduction at source mechanism and prevents parties from contracting out of it