The Upper Tribunal’s confirmation that relief is available for bonus clawbacks is welcome, but that relief is limited. Instead of repaying PAYE deducted from the bonus, the relief is a deduction against income in the tax year when the bonus is repaid. Even if the employee has sufficient income in that year, the £50,000/25% limit on loss relief might prevent effective relief being available. The decision highlights the importance of the terms of the employment contract. This was vital in securing relief and alternative contractual arrangements might secure more beneficial tax relief for other taxpayers.
