Lump sums paid in continuing employment

Source: HM Revenue & Customs | | 22/10/2019

A lump sum payment can sometimes be made in lieu of all or part of an employee’s salary, wage, commission or other amounts to which they are entitled by virtue of their employment. Under these circumstances, the lump sum payments are taxable as earnings. The lump sums are referred to in the legislation as ‘substituted remuneration’ to mean that one form of remuneration has been substituted for another.

A number of cases have illustrated this opinion. One of these cases, Bolam v Muller set the principle that a lump sum paid was remuneration for services to be rendered and was taxable as earnings. The Judge, Atkinson J in this 1947 case stated that:

'It seems to me so plain. It is obvious… that the bonuses he would have received if they had been paid under the agreement would have been profits from his employment, and the mere fact that they agree on another form of remuneration does not alter its character.'

The same principle also applies where the earnings given up is a benefit in kind.



 

Latest News

Final reminder to sign up for Help to Buy
19/11/2019 - More...
The Help to Buy ISA scheme will close to new savers after 30 November 2019. If you are interested in signing up to the scheme you need to do so ASAP and certainly before midnight

Capital Gains Tax changes for property disposals
19/11/2019 - More...
A number of significant changes to the way Capital Gains Tax (CGT) is reported and paid come into effect from April 2020. Currently, the usual due date for paying any CGT owed to

Emergency flood relief measures
19/11/2019 - More...
The Prime Minister has announced that households and businesses that have been significantly affected by the recent flooding will be eligible for immediate 100% relief on their

Search


Newsletter

With our newsletter, you automatically receive our latest news by e-mail and get access to the archive including advanced search options!

» Sign up for the Newsletter
» Login