Employment Income: Scope |
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to use this power in county court collection proceedings, it is open to the defendant-employee to raise the public law defence that on no view of the evidence could the Board reach that conclusion.186 |
When the PAYE system has been applied to income the Crown may make an assessment as regards income in the light of the practice generally prevailing,187 provided it does so within 12 months following the year for which the assessment was made;a rule which binds the Revenue and does not affect the taxpayer’s right of appeal.188 Separate provisions apply where an employer makes a lump sum settlement of PAYE which, it is estimated, should have been deducted on wages paid.189 |
13A.4.4 The Cumulative Withholding System |
13A.4.4.1 Annual |
The system is one of cumulative withholding over the year. Full account is taken of the employee’s income from this source and of such personal allowances as each may be entitled to. In essence, each is allowed 1/52nd of the relevant allowances each week, or 1/12th each month. At the end of any week taxable income is calculated by subtracting the accumulated 1/52nd shares of the allowances from the taxable pay to date. If the income rises over the year the tax will rise with it; if it falls, eg because of a change of job or a strike, a repayment may be made by the employer, or lower tax paid for the rest of the year. In the 1970s it was realised that if an employee went on strike late in the tax year the tax repayment due would help supplement any strike pay and so prolong the strike. Repayments to people directly involved in a strike are therefore not made until the employee returns to work or finds other employment.190 |
13A.4.4.2 Indirect Enforcement of Other Liabilities by PAYE |
Although the system applies to schedule E income only, it can, in effect, be used to collect tax in respect of other sources. This is achieved by directing that the taxpayer’s allowances shall be attributed to those other sources of income, thus reducing the allowances to be set against the schedule E income and so gathering the tax from the schedule E source. The system can also be used to collect underpayments of tax from that or a previous year, as well as to refund overpayments. |
At one time, benefits in kind were not subject to PAYE directly; they could, however, be taxed indirectly by reducing the value of the reliefs which could be set against PAYE income through the coding system. Where the |