HMRC enhance the PAYE rules on ‘Disguised Remuneration’

In the autumn Budget the Chancellor announced that steps would be taken to ensure that PAYE arising on ‘disguised remuneration’ loans could be passed to employees if the employer failed to pay the amounts due. As part of this process, the PAYE regulations have now been amended and from 13 February 2019 the new Income Tax (Pay As You Earn) (Amendment) Regulations 2019 (SI 2019/83) come into force by amending the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682) as follows:

• Regulation 80 (Determination of unpaid tax and appeal against determination): will apply to notional payments where an employer has not been able to deduct the full amount of tax because of insufficient relevant payments (regulation 62(5)).
• New paragraph 16A of schedule A1: when making real time returns under PAYE, employers must ensure that where there is a relevant step under the ‘disguised remuneration’ legislation the relevant payment will be treated as a payment of PAYE income (Part 7A of the Income Tax (Earnings and Pensions) Act 2003 (Employment income provided through third parties))

The explanatory notes suggest that the amendments do not represent a change of policy.