Explanatory note

These Regulations amend the Income Tax (Employments) Regulations 1973 (“the PAYE Regulations”) so as to introduce, with respect to payments of emoluments made on or after 6th April 1993, a new system of coding designed to enable income tax on benefits in kind to be collected through the PAYE system rather than having to be assessed on the employee at the end of the tax year. Under the system an employee is given a code (a ‘K’ code) which instructs his employer to increase the employee’s taxable pay by a certain amount which reflects the amount by which his benefits in kind exceed his personal allowances. Tax is then deducted under the PAYE system by reference to the resulting total. The system contains an overriding limit on the amount of tax which may be deducted from a payment of emoluments so as to ensure that the tax liability does not exceed 50 per cent. of the employee’s pay. The new system of ‘K’ codes also replaces ‘F’ codes which are currently used where state retirement pensions exceed personal allowances.

Regulation 1 provides for citation and commencement and regulation 2 contains definitions.

The remainder of the Regulations make amendments to the PAYE Regulations.

Regulation 3 amends definitions in regulation 2(1) of the PAYE Regulations and provides for further definitions to be inserted.

Regulation 4 amends regulation 6 of the PAYE Regulations and caters for the situation where the employer does not receive a code authorisation for the tax year 1993/94 in respect of an employee who is a pensioner and, owing to the replacement from the beginning of that year of the F code by the new K code, the rule in regulation 6 that the previous year’s code applies in such a case is ineffective.

Regulation 5 amends regulation 7 of the PAYE Regulations (determination of appropriate code) to reflect the new system of “K” codes.

Regulation 6 amends regulation 8 of the PAYE Regulations by deleting paragraph (1A) as a consequence of the replacement of F codes by the new K codes.

Regulations 7 to 18 amend regulations 13, 17, 18, 20, 24, 30, 51, 55, 57, 59, 60 and 63 respectively of the PAYE Regulations so as to ensure that the latter Regulations apply to the new system of K codes.