Explanatory note

These Regulations amend the Income Tax (Pay As You Earn) Regulations 2003 (S.I. 2003/2682: “the PAYE Regulations”) so as to allow Her Majesty’s Revenue and Customs to use PAYE coding to recover all or part of certain debts owed to them.

The class of debts that may be recovered in this way is determined by reference to the definition of “relevant debt” in section 684 of the Income Tax (Earnings and Pensions) Act 2003. The definition of “relevant debt” was inserted into that section by Schedule 58 to the Finance Act 2009 (c. 10). Regulation 2(2) inserts a new regulation 14A into the PAYE Regulations which will enable the recovery of relevant debts by way of an adjustment to the tax code.

Regulation 2(3) amends regulation 186 of the PAYE Regulations so as to increase the limit on the amount that can be recovered by coding adjustments in respect of self assessment debts for the previous tax year from £2,000 to £3,000.

An Impact Assessment covering this instrument was published at Budget 2009 and is available on the HMRC website at http://www.hmrc.gov.uk/ria/index.htm. A Tax Information and Impact Note covering the increase in the coding out limit was published in April 2011 and is available on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm. Both documents remain an accurate summary of the impacts that apply to this instrument.