»Ê¹ÚÌåÓýapp

Section 62(3)(a) ITEPA 2003

»Ê¹ÚÌåÓýapp employer cannot operate PAYE when making a payment to a third party such as a gas company, or British Telecom. Instead, the item has to be shown on form P9D (for 2015/16 and earlier) or P11D as appropriate. But when the employer undertakes to pay remuneration free of income tax, that is without recovering it from the employee, there is further tax to be paid. Guidance is at EIM07700.

Where the employer pays an employee’s bill indirectly by giving the employee the cash with which to pay the bill, PAYE should be operated. »Ê¹ÚÌåÓýapp employer is then paying cash earnings to the employee, not discharging a debt.

»Ê¹ÚÌåÓýapp position can be illustrated by reference to Wilkins v Rogerson (39TC344) (see example EIM00550). »Ê¹ÚÌåÓýapp employer in that case gave the employee a suit. »Ê¹ÚÌåÓýapp employee was held to be chargeable on its second-hand value. But altering the facts slightly produces different results.

• If the employee had gone along to the shop and ordered the suit and the employer had paid his employee’s bill, the employee would have been chargeable on its full cost. »Ê¹ÚÌåÓýapp employer would have discharged the employee’s debt (see EIM00580). »Ê¹ÚÌåÓýapp employer could not deduct tax from the payment under PAYE
• If instead of paying the bill direct, the employer decided to give the employee the cash with which to pay the bill, he would have to pay his employee such a sum as after deducting PAYE from it left the amount of the bill. »Ê¹ÚÌåÓýapp cash is taxable as earnings, like a salary or wage, from which PAYE tax has to be deducted.