Chapter EIM00630

Published date22 May 2014
Record NumberEIM00630
Section 62 ITEPA 2003

A payment made under the terms of a contract of employment is taxable as earnings within Section 62 ITEPA 2003 if it is part of the remuneration for the employee’s services. This is so even if the contract describes the payment as something else. For example, a contractual termination payment may be mistakenly described as compensation for loss of office. Such a payment is nevertheless taxable in full as earnings within Section 62 (see EIM00510).

You may have to look beyond the bare contract of employment to decide if a payment is contractual. Additional terms and conditions may be found in such things as staff hand books and wage negotiation agreements. In the case of a director with no written service agreement, you may have to look at the company’s articles of association to find out what is due.

Decided cases that illustrate that a sum payable under a contract of employment is taxable as earnings include:

  • Henry v Foster (16TC605), see example EIM00635
  • Allen v...

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