EIM42271 - Employment income: basis of assessment for general earnings: the time when earnings are received: actual payment: example of a case where income is paid to a third party

Rule 1, Sections 18(1) and 686(1) ITEPA 2003

Example 1

An employee is awarded a bonus of £1,000 for the year ended 31 March 2005, payable on 30 April 2005. The employee asks the employer to pay the £1,000 to a specified charity and the employer does so on the payment date. This is simply an application of the employee’s own remuneration, so the £1,000 is chargeable on the employee in 2005/06 and the employer must operate PAYE at the time of payment.

The position would be the same if, for example, the employee asked the employer to pay the money to a building society to pay off part of the employee’s mortgage - if an employee is entitled to receive money, and that money is redirected to a third party, PAYE must still be operated as if the money was paid directly to the employee.

Example 2

An employee gets into financial difficulty and the employer decides to help out the employee by paying their domestic gas and electricity bills. The employer does not expect repayment, so the payments are not a loan.

The payment is not paid out of remuneration due to the employee, so it is not an application or redirection of the employee’s remuneration. The employer does not need to operate PAYE on the payment.

The item should be shown on form P9D (for 2015/16 and earlier) or P11D as appropriate (see EIM00590).