Restrictive undertakings: operation of PAYE on consideration
Operation of PAYE on payments made in respect of restrictive covenants
The employer should operate PAYE on a payment chargeable by virtue of Section 225 ITEPA 2003. If the employer fails to deduct tax under PAYE tax offices should treat that as a PAYE failure and take the appropriate action.
Payment to recipient who is not an “employee”
In certain circumstances a payment may be made by a person who is not the individual’s employer in the contractual sense. See example EIM03624. The PAYE regulations require the payer to deduct tax under PAYE at basic rate and pay it over to the collector.
The individual has the responsibility to return and self assess any higher rate liability.