HMRC internal manual

Employment Income Manual

Employment income: basis of assessment for general earnings: assessments made after a change of practice: how the change of practice rule applies

Section 709 ITEPA 2003

The rule where there has been a change of practice (see EIM42440) is as follows:

  • if an assessment is being made that includes income within EIM42450 received more that 12 months before the start of the assessing year (the year in which the assessment or self-assessment is made) and
  • the assessment or self-assessment is being made more than 12 months after the year to which it relates, then
  • the assessment or self-assessment must be made in accordance with the practice generally prevailing on 5 April in the year following the year for which it is being made.

For example, if the generally prevailing practice in relation to earnings from employment is changed by a decision in the Courts on 1 May 2004, make assessments:

  • for 2002/03 and earlier years on the old practice whenever the assessments are made
  • for 2003/04 onwards on the new practice whenever the assessments are made.

The rule operates in the simple way shown in this example because earnings from employment are assessed for the year they are received (see EIM42200 onwards).

The rule does not operate so simply for other sorts of PAYE income (such as pensions or Social Security payments) where the income may be assessable in a different year to the year in which it was actually received.

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