Lump sums paid in continuing employment
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
- Tax Diary June/July 2024
07/05/2024 - More...
1 June 2024 - Due date for corporation tax due for the year ended 31 August 2023. 19 June 2024 - PAYE and NIC
- Cyber protection laws introduced
07/05/2024 - More...
New consumer protections against hacking and cyber-attacks came into force at the end of April 2024. All internet
- New Companies House powers
07/05/2024 - More...
The recently introduced Economic Crime and Transparency Act has gifted Companies House a range of new powers aimed at
Search archive
Newsletter
With our newsletter, you automatically receive our latest news per e-mail and get access to the archive including advanced search options!