Last edited 16 Aug 2016

Pay as you earn in construction PAYE

The Pay as you Earn scheme, or more familiarly, PAYE, is the means by which HM Revenue and Customs (HMRC) deduct tax and National Insurance contributions from employees.

Any person, whether an individual or company, who employs someone under a contract of employment is obliged to operate a PAYE scheme and then deduct tax and national insurance before passing those deductions to HMRC.

It is important for potential employers to have a full understanding of these rules and to ensure that they are applied correctly. In particular it is necessary to understand the meaning of “employee” so that PAYE is applied only to those individuals who can be so categorised.

For construction industry employers the application of PAYE has added complexity as the requirements of IR 35 and the Construction Industry Scheme have a direct bearing on the applicability of PAYE in particular cases.

Administering PAYE can be a time-consuming process for employers with a variety of reporting requirements and deadlines to be met. For this reason many small employers prefer to outsource the administration of the scheme to external service providers who undertake full payroll and reporting obligations via the use of proprietary software.

For more details visit HMRC: PAYE

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