Getting ready

Taxation of PAYE on a receipts basis

Preparation for PAYE modernisation is highlighting the position where some employers have not been fully compliant with PAYE obligations. You must comply with your obligation to operate PAYE by reference to the date you make payments to your employees. You may need to regularise your position where you have not been fully compliant.

Some employers have incorrectly operated PAYE on the payment in the period it is earned.

More information can be found in Transitional Arrangements for PAYE modernisation.

Wages payments in advance or on account

Payments in advance or on account are pay for PAYE purposes. This includes:

  • director’s drawings in advance or on account of remuneration
  • payments to or on behalf of a director in advance of the voting of remuneration.

PAYE must be operated on these payments in the period which they are paid.

Any additional payment linked to the advance should be treated as pay in the period it is paid or voted. This applies even if the additional payment is made in a different income tax year.