Income Tax (Earnings and Pensions) Act 2003
Income Tax (Earnings and Pensions) Act 2003
2003 CHAPTER 1
An Act to restate, with minor changes, certain enactments relating to income tax on employment income, pension income and social security income; and for connected purposes.
[6th March 2003]
Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
Part 1
Overview
1 Overview of contents of this Act
1 Overview of contents of this Act
(1) This Act imposes charges to income tax on—
(a) employment income (see Parts 2 to 7),
(b) pension income (see Part 9), and
(c) social security income (see Part 10).
(2) Those charges to tax have effect for the purposes of section 1(1) of ICTA [The Income and Corporation Taxes Act 1988 (c. 1)] (the general charge to income tax).
(3) This Act also—
(a) confers certain reliefs in respect of liabilities of former employees (see Part 8),
(b) provides for the assessment, collection and recovery of income tax in respect of employment, pension or social security income that is PAYE income (see Part 11), and
(c) allows deductions to be made from such income in respect of payroll giving (see Part 12).
2 Abbreviations and general index in Schedule 1
2 Abbreviations and general index in Schedule 1
(1) Schedule 1 (abbreviations and defined expressions) applies for the purposes of this Act.
(2) In Schedule 1—
(a) Part 1 gives the meaning of the abbreviated references to Acts and instruments used in this Act, and
(b) Part 2 lists the places where expressions used in this Act are defined or otherwise explained.
(3) Part 2 of Schedule 1 does not apply to expressions used in Chapters 6 to 9 of Part 7 (share incentive plans and other arrangements for acquiring shares): separate indexes relating to these Chapters appear at the end of Schedules 2 to 5.
Part 2
Employment income: charge to tax
Chapter 1
Introduction
3 Structure of employment income Parts
3 Structure of employment income Parts
(1) The structure of the employment income Parts is as follows—
this Part imposeas the charge to tax on employment income, and set out—
(a) how the amount charged to tax for a tax year is to be calculated, and
(b) who is liable for the tax charged;
Part 3 sets out what are earnings and provides for amounts to be treated as earnings;
Part 4 deals with exemptions from the charge to tax under this Part (and, in some cases, from other charges to tax);
Part 5 deals with deductions from taxable earnings;
Part 6 deals with employment income other than earnings or share-related income; and
Part 7 deals with share-related income and exemptions.
(2) In this Act ‘the employment income Parts’ means this Part and Parts 3 to 7.
4 ‘Employment’ for the purposes of the employment income Parts
4 ‘Employment’ for the purposes of the employment income Parts
(1) In the employment income Parts ‘employment’ includes in particular—
(a) any employment under a contract of service,
(b) any employment under a contract of apprenticeship, and
(c) any employment in the service of the Crown.
(2) In those Parts ‘employed’, ‘employee’ and ‘employer’ have corresponding meanings.
5 Application to offices and office-holders
5 Application to offices and office-holders
(1) The provisions of the employment income Parts that are expressed to apply to employments apply equally to offices, unless otherwise indicated.
(2) In those provisions as they apply to an office—
(a) references to being employed are to being the holder of the office;
(b) ‘employee’ means the office-holder;
(c) ‘employer’ means the person under whom the office-holder holds office.
(3) In the employment income Parts ‘office’ includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders.
Chapter 2
Tax on employment income
6 Nature of charge to tax on employment income
6 Nature of charge to tax on employment income
(1) The charge to tax on employment income under this Part is a charge to tax on—
(a) general earnings, and
(b) specific employment income.
The meaning of ‘employment income’, ‘general earnings’ and ‘specific employment income’ is given in section 7.
(2) The amount of general earnings or specific employment income which is charged to tax in a particular tax year is set out in section 9.
(3) The rules in Chapters 4 and 5 of this Part, which are concerned with—
(a) the residence and domicile of an employee in a tax year, and
(b) the tax year in which amounts are received or remitted to the United Kingdom,
apply for the purposes of the charge to tax on general earnings but not that on specific employment income.
(4) The person who is liable for any tax charged on employment income is set out in section 13.
(5) Employment income is not charged to tax under this Part if it is within the charge to tax under Case I of Schedule D by virtue of section 314(1) of ICTA [The Income and Corporation Taxes Act 1988 (c. 1)] (divers and diving supervisors).
7 Meaning of ‘employment income’, ‘general earnings’ and ‘specific employment income’
7 Meaning of ‘employment income’, ‘general earnings’ and ‘specific employment income’
(1) This section gives the meaning for the purposes of the Tax Acts of ‘employment income’, ‘general earnings’ and ‘specific employment income’.
(2) ‘Employment income’ means—
(a) earnings within Chapter 1 of Part 3,
(b) any amount treated as earnings (see subsection (5)), or
(c) any amount which counts as employment income (see subsection (6)).
(3) ‘General earnings’ means—
(a) earnings within Chapter 1 of Part 3, or
(b) any amount treated as earnings (see subsection (5)),
excluding in each case any exempt income.
(4) ‘Specific employment income’ means any amount which counts as employment income (see subsection (6)), excluding any exempt income.
(5) Subsection (2)(b) or (3)(b) refers to any amount treated as earnings under—
(a) Chapters 7 and 8 of this Part (application of provisions to agency workers and workers under arrangements made by intermediaries),
(b) Chapters 2 to 11 of Part 3 (the benefits code),
(c) Chapter 12 of Part 3 (payments treated as earnings), or
(d) section 262 of CAA 2001 [The Capital Allowances Act 2001 (c. 2)] (balancing charges to be given effect by treating them as earnings).
(6) Subsection (2)(c) or (4) refers to any amount which counts as employment income by virtue of—
(a) Part 6 (income which is not earnings or share-related),
(b) Part 7 (share-related income and exemptions), or
(c) any other enactment.
8 Meaning of ‘exempt income’
8 Meaning of ‘exempt income’
For the purposes of the employment income Parts, an amount of employment income within paragraph (a), (b) or (c) of section 7(2) is ‘exempt income’ if, as a result of any exemption in Part 4 or elsewhere, no liability to income tax arises in respect of it as such an amount.
Chapter 3
Operation of tax charge
9 Amount of employment income charged to tax
9 Amount of employment income charged to tax
(1) The amount of employment income which is charged to tax under this Part for a particular tax year is as follows.
(2) In the case of general earnings, the amount charged is the net taxable earnings from an employment in the year.
(3) That amount is calculated under section 11 by reference to any taxable earnings from the employment in the year (see section 10(2)).
(4) In the case of specific employment income, the amount charged is the net taxable specific income from an employment for the year.
(5) That amount is calculated under section 12 by reference to any taxable specific income from the employment for the year (see section 10(3)).
(6) Accordingly, no amount of employment income is charged to tax under this Part for a particular tax year unless—
(a) in the case of general earnings, they are taxable earnings from an employment in that year, or
(b) in the case of specific employment income, it is taxable specific income from an employment for that year.
10 Meaning of ‘taxable earnings’ and ‘taxable specific income’
10 Meaning of ‘taxable earnings’ and ‘taxable specific income’
(1) This section explains what is meant by ‘taxable earnings’ and ‘taxable specific income’ in the employment income Parts.
(2) ‘Taxable earnings’ from an employment in a tax year are to be determined in accordance with—
(a) Chapter 4 of this Part (rules applying to employees resident, ordinarily resident and domiciled in the UK), or
(b) Chapter 5 of this Part (rules applying to employees resident, ordinarily resident or domiciled outside the UK).
(3) ‘Taxable specific income’ from an employment for a tax year means the full amount of any specific employment income which, by virtue of Part 6 or 7 or any other enactment, counts as employment income for that year in respect of the employment.
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