The following Employment Tax guidance note Produced by Tolley in association with Sarah Bradford provides comprehensive and up to date tax information covering:
Many employers operate bonus or incentive schemes in addition to paying basic salaries to their employees. Such schemes will normally make it clear whether entitlement is discretionary or contractual.
Discretionary bonuses usually give employees a contractual right to be considered for a bonus or incentive payment under the scheme, but not necessarily to receive one. In the absence of express agreement a bonus entitlement may be implied on the basis of established custom and practice, eg a right to be paid a Christmas bonus may be implied where it has been paid to all employees for a number of previous years (see Frischers v Taylor (unreported EAT 386/79)).
Any bonus entitlement should be included in the employees' written statement of employment particulars. See the Written statement of particulars or terms and conditions and Definition of wages guidance notes.
Bonus schemes are generally intended to ensure that employees focus their efforts on key objectives of their employer's business. The benefit for the employee is that he may receive greater financial reward. The benefit for the employer is that employees are motivated to work harder and not lose their bonus entitlement by leaving employment.
Where a bonus is paid in cash, it is liable to PAYE tax and Class 1 national insurance. Bonuses paid in kind are taxable in accordance with the benefit in kind rules.
Most bonus schemes link bonus payments to some measure of performance. In this way they can be used to motivate employees. For these purposes, performance may be measured as that of an individual employee, of a team of employees or even of the employer's entire business. Bonus schemes can take a variety of forms and can include profit share schemes, commission and share option schemes. They may be all-employee schemes or individualised bonus schemes.
Bonus schemes typically measure performance by reference to pre-determined targets. Many bonus schemes are relatively straightforward and are linked to sales or other objective performance targets. Under such schemes,
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
‘Hold-over’ relief allows for the deferral of a gain that would otherwise arise in relation to a disposal. No capital gains tax (CGT) is due in respect of the disposal, but the base cost of the asset for the transferee for the purpose of a future disposal is reduced by an amount equal to the gain
The basic rule is that all benefits provided to an employee by reason of their employment are taxable unless there is a specific exemption or other rule that means they are not chargeable to tax.ExemptionsThe main exemptions for employee benefits are in ITEPA 2003, ss 227–326B (Pt 4).Below is an
Normal due dateSmall companies (including marginal relief companies) are required to pay all of their corporation tax ― nine months and one day ― after the end of the chargeable accounting period.For example, where a chargeable accounting period ends on 31 December 2018, the due and payable date for
This guidance note provides an overview of what conditions need to be met before a business is entitled to treat VAT incurred as input tax. This note should be read in conjunction with the other notes in the ‘Claiming input tax’ subtopic. For a flowchart outlining the procedure for claiming input
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.