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value of these benefits exceeded the available allowances
there was provision for ‘negative coding’ which applied whenever
non-PAYE pay exceeded the allowances. Negative coding creates ‘additional
pay’ which can be taxed at source.191
The tax to be deducted from a particular cash payment is not to exceed
50% of the payment.192
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13A.4.5 PAYE and Self-Assessment |
In principle, the primary charge to income tax is the charge under self-assessment. PAYE is simply a method of withholding tax, which is brought into the calculation of the balancing payment. However, the Revenue does not issue self-assessment forms to most of those whose incomes fall predominantly under the PAYE system. Moreover, where the underpayment in the year amounts to £1,000 or less and arises solely in respect of emoluments to which PAYE is applied, the underpayment can be collected by adjustment of the PAYE code. |
A particular problem under self-assessment is that a director or employee who receives benefits in kind and to whom a self-assessment tax return is not issued, is not in a position to know whether the Revenue is proposing to collect tax on the benefits in kind through amendment of the PAYE code for the following year, or whether he should notify chargeability in order to make his own self-assessment. Penalties can be imposed if the employee does not notify chargeability. |
The Revenue accepts that employees who receive such a copy of the information on a P11D can assume that any items on it which are not already taken into account for PAYE ‘will be’ taken into account for PAYE, so that there is no need to notify chargeability because of them. This does not, however, apply where the particular employee knows that the P11D return has not, in fact, been submitted to Revenue.193 |
13A.4.6 Commentary |
There are disadvantages in the PAYE system. First, there is the trouble and expense to employers of finding and paying staff to operate the system. In fact, many of these staff are ex-employees of the Revenue who leave for better pay after having been trained by the Revenue. The expense of these employees will be deductible by the employer in computing his profit for the year, but this still leaves a substantial burden of the operating costs of the system to fall on the employer.194 One wonders whether a tax credit rather than a tax deduction might not be more appropriate. Secondly, there is the fact, less pronounced in the PAYE system than in other cruder withholding systems, that tax may be withheld incorrectly and that a repayment may take some time to take effect. Thirdly, it |