{"id":407,"date":"2012-09-11T00:42:42","date_gmt":"2012-09-11T00:42:42","guid":{"rendered":"https:\/\/david-kirk.co.uk\/?p=407"},"modified":"2014-03-19T09:53:24","modified_gmt":"2014-03-19T09:53:24","slug":"deduction-of-paye-from-holiday-pay","status":"publish","type":"post","link":"https:\/\/david-kirk.co.uk\/?p=407","title":{"rendered":"Deduction of PAYE from holiday pay"},"content":{"rendered":"

Who is responsible?
\nA solicitor assists employees in recovering unpaid holiday pay from current or former employers on a no win\/no fee basis. He recovers his fee from any payment made
\nA client of ours is a solicitor and has recently started a new service helping employees claim holiday pay from their employers who, for one reason or another, have failed to make the due holiday payment.
\nThe solicitor charges his clients on a no win\/no fee basis. Once his work is completed and any unpaid holiday pay has been recovered from the employer, this is mandated to be paid to his firm under the arrangement he has with his client. The employer therefore pays the solicitor, who takes a percentage fee from the holiday pay.
\nIs the solicitor obliged to deduct PAYE before he pays the net of commission amount to his client? And, if so, can he first offset his commission?
\nDoes it make any difference if the employee has already left the employment and finally, out of interest, should the employer\/former employer deduct PAYE before paying the solicitor the outstanding holiday pay? Naturally, our client is keen not to fall foul of any PAYE obligations.
\nReaders\u2019 thoughts would be very much appreciated here.
\nQuery 18,255 \u2013 Working Man
\nReply from David Kirk, author of Employment Status \u2013 the Tax Rules
\nThe Income Tax (Pay As You Earn) Regulations SI 2003\/ 2682, Reg 21 specifies, \u201cOn making a relevant payment to an employee during a tax year, an employer must deduct or repay tax in accordance with these regulations by reference to the employee\u2019s code, if the employer has one for the employee.\u201d
\nOn the face of it, this would indicate that the payment from the employer to the solicitor was not covered, because PAYE would only apply to payments \u201cto an employee\u201d.
\nHowever, it probably is covered: the solicitor would normally be the agent of the employee for this purpose, in which case the payment is treated as being made to the employee under the laws of agency.
\nIf the solicitor does receive the pay gross, he is under no obligation to deduct PAYE from the payment. He is not the employer\u2019s agent or intermediary, but the employee\u2019s, and this particular payment therefore does not come within the PAYE regulations.
\nWhile the payment is one of PAYE income, and thus a \u201crelevant payment\u201d, it is received by the employee in their capacity as employee and therefore only subject to deduction of PAYE if paid by the employer or someone paying on their behalf. The High Court judgment in R oao Oriel Support Ltd v HMRC [2008] EWHC 1304 (Admin) goes into this in some detail, if somewhat confusingly.
\nThere are some special rules in the PAYE regulations for holiday pay, but these do not apply here. They are aimed at holiday pay funds, and require the payment to be \u201cin exchange for a voucher, stamp or similar document\u201d.
\nThe situation is no different if the employee has left, except that code 0T should be used if the P45 has already been issued, on a week 1\/month 1 basis, using the normal payment interval non- cumulatively.
\nThe situation with National Insurance is somewhat simpler: liability arises when earnings are paid \u201cto or for the benefit of an earner\u201d (SSCBA 1992, s 6). This covers the payment to the solicitor. SSCBA 1992, s 7 specifies the employer to be responsible for the employer\u2019s contribution, and SSCBA 1992, Sch 1 para 3 specifies the employer to be responsible for the employee\u2019s contributions.
\nIf the employee has left, then HMRC\u2019s booklet CWG2 says that \u201cfor an irregular sum, such as accrued holiday pay\u201d National Insurance should be applied using a weekly earnings period.
\nCategories:\u00a0 Income Tax [1] Tax Topic Tags:\u00a0 Forum & Feedback [2] [3] [3] [3] [3] [3]
\nSource URL: http:\/\/www.taxation.co.uk\/taxation\/Articles\/2013\/09\/11\/313271\/who-responsible<\/a>
\nLinks: [1] http:\/\/www.taxation.co.uk\/taxation\/category\/income-tax<\/a> [2] http:\/\/www.taxation.co.uk\/taxation\/category\/content-type\/forum-feedback<\/a> [3] http:\/\/www.addthis.com\/bookmark.php?v=250<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Who is responsible? A solicitor assists employees in recovering unpaid holiday pay from current or former employers on a no win\/no fee basis. He recovers his fee from any payment made A client of ours is a solicitor and has recently started a new service helping employees claim holiday pay from their employers who, for […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/david-kirk.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/407"}],"collection":[{"href":"https:\/\/david-kirk.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/david-kirk.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/david-kirk.co.uk\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/david-kirk.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=407"}],"version-history":[{"count":1,"href":"https:\/\/david-kirk.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/407\/revisions"}],"predecessor-version":[{"id":408,"href":"https:\/\/david-kirk.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/407\/revisions\/408"}],"wp:attachment":[{"href":"https:\/\/david-kirk.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=407"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/david-kirk.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=407"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/david-kirk.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=407"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}