15 May 2003

New EAT Decisions

New Tax Act

The Income Tax (Earnings and Pensions) Bill, referred to in my bulletin dated 5/12/02, has now been enacted and is available on the internet. It is known, unsurprisingly, as the Income Tax (Earnings and Pensions) Act 2003. It came into force on 6th April 2003.

It repeals and replaces the dearly loved employment sections of the Income and Corporation Taxes Act 1988 (including ss19 and 148). The substantive law is essentially unchanged; the wording has been tidied up and the section numbers now differ.

The two sections of the ITEPA 2003 which are of principal relevance to employment lawyers are:

section 6, which charges tax on employment income. This is defined, in section 62, as:

(a) any salary, wages or fee,

(b) any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or

(c) anything else that constitutes an emolument of employment.

and

section 401, which charges tax on payments made in respect of “the termination of a person’s employment” insofar as they exceed £30,000 (section 403).

It is important that firms review their compromise agreements to ensure they contain the correct statutory references.

LINK:

Daniel Barnett

15th May 2003