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HMRC internal manual

PAYE Manual

From
HM Revenue & Customs
Updated
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PAYE operation: payments for PAYE purposes: occupational retirement benefit schemes

The following are chargeable to tax under ITEPA 2003 and PAYE should be applied

  • Pensions paid direct by the administrator of a superannuation scheme which is approved or being considered for approval
  • Annuities paid to scheme members by Life Offices under contracts securing the benefits

The Relief Instructions at RE1620 onwards give more information, including details of annuities paid by life assurance companies under the form R86 or R89 procedure.

Pensions to non-UK residents

PAYE usually applies to pensions payable to non-UK residents but see Employment Income Manual at EIM74402.

Relief may be allowable under a Double Taxation Agreement, see EIM74403.

Pension for unmarried minor child

A pension payable to any dependant is taxable through PAYE, see Pensions Tax Manual (PTM) PTM072300. Where you are notified of the commencement of payment of a pension to a dependant child and it is clear that the child has full title to the pension, a PAYE Service record should be created for that pension and a code issued. If the child is below age 16, correspondence should be addressed to the parent or guardian, whose details should be recorded as the Capacitor.

The child if liable, will pay tax at the UK (England, Wales and Northern Ireland) or Scottish Income Tax rates depending on their residency status.

The Income Tax Residency Status screen on NPS will display ‘Scottish Taxpayer’ for the tax year where the individual is liable to pay tax at the Scottish rate(s) and their tax code will have an S prefix. Further information about the Scottish rate of Income Tax is given at PAYE100035.

Send the case to HMRC Trusts Bootle where

  • A pension under such a scheme is paid in respect of an unmarried minor child
    And
  • There is doubt that the child has title to the pension

Obtain and attach a copy extract of the rules of the scheme under which the pension is paid.

Non-pension payments

The employee is chargeable to tax in the year the payment is made if

  • The payment is not a pension payment
    And
  • It is not expressly authorised by the rules of an approved or formally approved scheme (EIM74009)

When you become aware of such payments, inform HMRC SPSS (Nottingham) before including the payment in the calculation of the employee’s liability or telling the individual to include the payment in their self assessment.

The employee will pay tax at the UK (England, Wales and Northern Ireland) or Scottish Income Tax rates depending on their residency status.

The Income Tax Residency Status screen on NPS will display ‘Scottish Taxpayer’ for the tax year where the individual is liable to pay tax at the Scottish rate(s) and their tax code will have an S prefix.Further information about the Scottish rate of income tax is given at PAYE100035.