PAYE: special types of payment: employee fails to make good PAYE: employee’s requirement
Section 222 ITEPA 2003
Section 222 ITEPA 2003 is concerned only with the tax that the employer is required to account for in accordance with Section 710(4) ITEPA 2003 (see EIM11950).
The employee must make good to the employer the full amount of the tax that the employer is required to pay within 90 days of the event giving rise to the notional payment. For example, if the event occurs on 28 February, the employee has until 29 May to make good the full amount to the employer.
If the employee does not make good the full amount within 90 days, then the shortfall is treated as earnings from the employment for the tax year in which the event giving rise to the notional payment occurred. The employer must show the amount that was not made good within 90 days as further remuneration on form P9D (for 2015/16 and earlier) or P11D after the end of the tax year in which the event occurred.
Employer does not operate PAYE correctly
Regardless of whether the employer operates PAYE correctly or not, if the employer is required by virtue of Section 710(4) ITEPA 2003 to account for an amount of income tax in respect of a notional payment, then Section 222 ITEPA 2003 may apply. The amount that the employer is required to account for by virtue of Section 710(4) remains the same whether or not the employer operated PAYE correctly. Irrespective of the employer’s actions, a Section 222 charge will arise if the employee does not make good the relevant amount of income tax to the employer within 90 days of the date of the notional payment.
Employee makes good after more than 90 days
If the employee makes good the relevant amount of income tax to the employer more than 90 days after the event giving rise to the notional payment, the Section 222 charge remains. The chargeable date is the date the notional payment was made. For example, in the case of a readily convertible asset, this would be the day the employer transferred to the employee ownership of the asset.