PAYE:

Is not a tax but, a means of collecting both tax and national insurance deductions from earnings. The deductions are calculated by reference to tables supplied by HM Revenue and Customs and recorded by employers.

The amounts collected are paid to HMRC in either monthly or, quarterly instalments and are summarised by the employer in the completion of an annual report form (P35) at the end of each tax year (5th April). These report forms must be returned to HMRC by 19th May or, penalties can be payable.

Employees are provided with a form P45 by their employer following the cessation of each employment, and at the year end, by provision of a form P60; showing the accumulated total tax and class 1 national insurance deducted from pay throughout the tax year.

Employers are also held responsible for reporting “Benefits” (eg: Motorcars/ fuel/ medical costs/professional subscriptions etc) paid on behalf of employees. These payments are reported on a form P11D at the tax-year end (5th April) by June of each year, or, a penalty may be charged.

It is possible to arrange a “dispensation” with the Inspector of Taxes, to avoid reporting some benefits. Your Tax Advisor will be able to arrange this for you.