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HMRC internal manual

Employment Income Manual

PAYE: special type of payer or payee: payments by intermediary: example

Section 687 ITEPA 2003An individual works for an employer in the UK. The employer contributes £100,000 to an employee benefit trust (EBT) established in Jersey by the employer for the benefit of its employees. Having properly considered a request from the employer, the trustees of the EBT make a cash award of £100,000 to the employee in recognition of the employee’s work over the previous year. The award is paid to the employee in full by the trustees.

Is PAYE due on the cash payment made out of the EBT?Payment of the cash award is a payment of PAYE income for the purposes of the PAYE regulations. But the person making payment is not resident in the UK and so is outside the jurisdiction of the PAYE regulations.

The trustees of the EBT are trustees holding property for a class of persons that includes the employee. So the payment is made by an intermediary of the UK employer. Therefore, for the purposes of the PAYE regulations, the UK employer is treated as making a payment equal to the amount paid.
### Can the trustees operate PAYE?The trustees may voluntarily deduct and account for the amount of tax due in accordance with the PAYE regulations. If the trustees do so, although the payment of PAYE income is made by an intermediary, the UK employer is not treated as making a payment.