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‘Negative taxable earnings’ from employment

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The February edition of HMRC’s Employer Bulletin draws attention to new guidance in the Employment Income Manual, on the concept and definition of ‘negative earnings’ from employment, following the Upper Tribunal decision HMRC v J Martin [2014] UKUT 429 (TCC).

In that case, the taxpayer received a signing bonus from his employer in consideration for a new contract of employment which reflected the employer’s wish for him to remain with that company for a period of at least five years. The terms of the contract included a claw-back provision to apply in certain circumstances, such as the early termination of the contract, requiring him to pay back an amount of money to the company.

Although the phrase ‘negative taxable earnings’ does not appear in the legislation, the judge construed it to refer to an item brought into account in computing the total amount of earnings in accordance with the formula contained within ITEPA 2003 s 11.

The guidance at EIM00805 onwards contains HMRC’s interpretation of the decision, including a number of examples.

Another article in the same edition of Employer Bulletin draws attention to new guidance in the Employment Income Manual clarifying issues that have arisen in respect of notional payments of PAYE made on behalf of employees and the corresponding charge under ITEPA 2003, s222. These include changes in relation to the definition of ‘making good’, time limits for making good and the presence of indemnities, as considered in the cases of Chilcott and others v HMRC [2011] STC 456 and Benedict Manning [2013] UKFTT 252 (TC).

The new guidance is contained in EIM11950 onwards.

Issue: 1342
Categories: News