Employment Income Manual update: negative taxable earnings

06 January 2023

A new section has been added to HM Revenue and Customs’ (HMRC’s) EIM00805 page of the Employment Income Manual (EIM).

The section added states:

“The Martin case also established that when a payment or bonus is ‘clawed back’ and a payment of negative earnings is made from employee to employer, this does not change the position of NICs or PAYE deductions for the original payment. No relief or repayment of NICs is possible. In these circumstances it is not necessary for the employer to make any changes to their RTI submissions. Taxpayers should contact HMRC directly to claim any tax relief due in the year the payment of negative earnings was made.”

This case revolves around a “signing bonus” that was required to be returned when leaving within the period agreed in the contract. This amendment clarifies HMRC’s interpretation of the rules to be applied in this situation when negative earnings occur.

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