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HMRC internal manual

Self Assessment: the legal framework

Other issues: assessment, employees, trustees, personal representatives and beneficiaries of estates: self assessment for employees: PAYE

Self assessment applies to employees who get tax returns or make claims

Who will get tax returns?

Around 28 million people are currently covered by the Pay As You Earn (PAYE) system. Up to 4 million of them are sent tax returns and required to self assess. These are people who are liable to tax at a higher rate and/or have relatively complicated tax affairs.

Information required in the tax returns

The information required is that needed to establish and calculate the taxpayer’s total taxable income (from all sources) and any chargeable gains for the period covered by the tax return and to calculate the tax due. For employees, the information required includes details of expenses payments and benefits (except those covered by a dispensation), as well as wages and salaries. Employers are required to provide all employees with details of expenses payments and benefits to enable them to complete tax returns if they get them.

Employers’ obligations

Obligations on employers are laid down in the PAYE Regulations.

PAYE Regulations

Employers have to:

  • send P11Ds to HMRC by 6 July
  • report expenses payments and benefits where they arrange the provision through third parties
  • show the cash equivalent of any benefits
  • copy the information on the P11D to the employee by 6 July
  • give the P60 to the employee by 31 May.

There is also an obligation on third parties making expenses payments and benefits to employees where the direct employer is not responsible for reporting them on form P11D. The third party has to provide written details to the employee of the expenses payments and benefits by 6 July following the tax year in which they are paid or provided, and, where benefits are provided, the cash equivalent has to be stated.

Section 15

Section 15 is a general information-seeking power enabling HMRC to require employers and third parties to provide details about expenses payments and benefits in kind provided to employees.

Section 15(5)(b) and (9)(b)

HMRC is able to ask the employer to provide information about expenses payments made to, and benefits provided for, his or her employees by another person where the employer has arranged them.

Section 15(9)(a) and 10(a)

In addition HMRC is able to require returns under Section 15 to include the cash equivalent for each benefit in kind.

Section 15(10)

Finally, HMRC is able to require third parties to return details of expenses payments as well as benefits.