When an employee who left his employer prematurely was forced to repay part of a bonus he had been awarded, the refusal of HM Revenue and Customs (HMRC) to regard the repayment as a reduction in income for the year in which the bonus had originally been paid came as an unpleasant surprise.
The £250,000 bonus was taxed as usual in the year of receipt. However, when the employee left the following year, his employer demanded a repayment of a proportion of the bonus. The deduction of tax etc. from the original bonus payment was not relevant for this: the repayment was of a gross sum.
The employee expected to be given tax relief for his repayment, but HMRC refused, claiming that it was a form of liquidated damages for his breaching the original contract.
The case has now been heard by the Upper Tax Tribunal, which has ruled that the repayment does qualify for tax relief as 'negative taxable earnings'.
HMRC Forced to Match Repayment With Earnings
For more information or to speak to one of our experts, please call us on 01606 48777
"Extremely fair, understanding, caring and knowledgeable in all aspects of family law."
Mr P"Amazing attitude and caring towards its customers in life's most stressful situations."
Anonymous"Highly recommend the conveyancing services. Extremely satisfied with the overall level of service provided - kept me informed at every stage, providing good information and advice."
Heather Woolley"Excellent efficient will-writing service from very friendly staff. Everything explained to us so that we understood it. Fantastic!"
Jane Imisson
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.