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HMRC internal manual

PAYE Manual

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HM Revenue & Customs
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PAYE operation: specific employments: armed forces: reserve and auxiliary forces

Changes from 6 April 2009

From 6 April 2009, the Ministry of Defence (MoD) agreed to operate normal PAYE on all payments made to reservists and comply with all the usual PAYE requirements. They will operate a full range of tax codes as notified by HMRC and provide starting and leaving details by submission of forms P46 and P45 (Parts 1 and 3). HMRC will set up and maintain records for all new reservists who start after 6 April 2009.

Prior to the start of the new procedures there were no records for the existing reservists, so HMRC agreed to set records up and issue the correct codes by April 2009. If a new code was not received, the MoD should have carried forward the existing code for use in 2009-10.

Income and expenses

The Employment Income Manual (EIM) at EIM50110 and EIM50120 tells you what income payable to the reserve and auxiliary forces is taxable and what expenses are allowable for years 2003-04 onwards.

Coding procedures prior to April 2009

The normal employment maintenance procedures apply to forces reservists whose call up lasts (or is expected to last) for more than a year. Refer to PAYE61055 and PAYE61056.

Where the period of call up is less than a year, then providing the employment is not ceasing permanently

  • The employer should not send in form P45
  • The employment is treated as continuing

When a reservist is called up for duty (mobilised), to ensure that he receives the full benefit of the personal allowances whilst on active duty, we must switch the personal allowances from an employment to the reservist pay for the period of mobilisation only. The allowances must be switched back when the reservist is de-mobilised (de-mobbed).

Note: This applies in all cases regardless of the length of mobilisation.

The Ministry of Defence (MoD) will provide weekly lists of reservists who are mobilised and de-mobilised. Upon receipt, follow the Action Guide at PAYE61056.

List of Reserve and Auxiliary Forces

  • Royal Fleet Reserve (including officers of the retired and emergency lists of the Royal Navy and Royal Marines)
  • Royal Naval Reserve (including Queen Alexandra’s Royal Naval Nursing Service Reserve)
  • Royal Marines Reserve
  • Army Reserve (including Regular Army Reserve of Officers)
  • Territorial Army
  • Air Force Reserve*
  • Royal Auxiliary Air Force
  • Officers, Adult Instructors and Adult Warrant Officers of the Sea Cadet Corps, Army Cadet Force, Air Training Corps or Combined Cadet Force

*Includes Royal Air Force Reserve of Officers, Royal Air Force Volunteer Reserve (including University Air Squadron members) and Class E Reserve of Airmen.