985C PAYE Payment by Intermediary

Summary

Section 985C provides that, where payments of emoluments are made by an intermediary on behalf of an employer, the employer is to be treated for the purposes of the PAYE regulations as having made the payment if the intermediary does not operate PAYE. If the employee is entitled to a net sum free of tax, the liability to be accounted for by the employer is to be calculated by reference to the grossed-up amount.

Details

(1) Where an intermediary of the employer makes any payment of emoluments of an employee, the employer is to be treated, for the purposes of the PAYE scheme, as making a payment of emoluments of an amount equal to the amount referred to below.

(2) The section does not apply, however, if the intermediary deducts income tax from the payment to the employee and accounts for it in accordance with the PAYE scheme.

(3) The amount on which the employer is to operate PAYE is the amount paid by the intermediary to the employee, grossed up if the payment is an “after tax” payment

(4) A payment of emoluments of an employee is made by an intermediary of the employer if it is made—

• by a person acting on behalf of the employer and at the expense of the employer or a person connected (within the meaning of section 10) with the employer, or
• by trustees holding property for any persons who include, or class of persons which includes, the employee.

Relevant Date: Finance Act 2021