Earnings and benefits

An employee can be remunerated in a number of ways, and any type of reward provided in relation to an individual’s employment may result in income tax and National Insurance contributions (NICs) liabilities. Consequently, Pay As You Earn (PAYE) obligations are likely to arise for the employer. The precise nature of the income tax and NICs charge will depend upon the type of remuneration.

Earnings

The UK employment tax provisions set out a comprehensive code which charges tax on both:

•
general earnings, and
•
specific employment income

'General earnings' includes, among other items, any salary, wages or fee, any item within the benefits code and 'anything else that constitutes an emolument of the employment' (with the word 'emolument' specifically included in the legislation to ensure the significant body of case law that had been built up prior to the introduction of the legislation in 2003 remained applicable).

'Specific employment income' includes:

•
certain employer-financed retirement benefits and payments and benefits on termination of employment under Part 6 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) (see: Taxation of termination payments—overview)

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