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RD 3B: Shareholders who are employees, for some companies: income other than PAYE
or “Income rules for shareholder-employees in certain companies”
You could also call this:

“Rules for shareholder-employees of certain companies on how their pay is taxed”

This section applies to you if you are both a shareholder and an employee of a company. The company must not be a look-through company and must either be a close company or have 25 or fewer shareholders. You also need to choose to use this section.

To use this section, you must get regular salary or wages from the company. Also, the company might pay you some money that could later be counted as part of your employee income for the year.

If you meet these conditions and choose to use this section, here’s what happens:

All the regular salary or wages you get from the company, both now and in the future, will be treated as PAYE income payments. PAYE stands for “Pay As You Earn” and means tax is taken out before you get the money.

Any other money the company pays you that might later be counted as part of your employee income will be treated differently. This money will not be treated as PAYE income. Instead, it will be treated as another type of income.

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Next up: RD 4: Payment of amounts of tax to Commissioner

or “Paying tax collected from workers' pay to the government”
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Part R General collection rules
Employment-related taxes: Introductory provisions

RD 3CShareholders who are employees, for some companies: PAYE and income other than PAYE

  1. This section applies for an income year for a person who is a shareholder and an employee of a company that is not a look-through company and is a close company or has 25 or fewer shareholders if the person elects to apply this section and—

  2. the person derives as an employee payments of salary or wages of a regular amount for regular pay periods; but
    1. an amount is paid as income that may later be allocated to the person as an employee for the income year.

      1. Repealed

      2. All amounts described in subsection (1)(a) paid to the person in the income year and in later income years in their capacity as employee of the company are PAYE income payments.

      3. All amounts described in subsection (1)(b) paid to the person in the income year and in later income years in their capacity as employee of the company are treated as income other than from a PAYE income payment.

      Notes
      • Section RD 3C: inserted, on , by section 261 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section RD 3C(1): amended, on (with effect on 30 March 2017), by section 188(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section RD 3C(2) heading: repealed, on (with effect on 30 March 2017), pursuant to section 188(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section RD 3C(2): repealed, on (with effect on 30 March 2017), by section 188(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).