| Employment Income: Emoluments |
9 |
14A.2 Timing |
14A.2.1 Normal Basis |
ITEPA has its own terminology, bordering on the theological. Where the employee is resident ordinarily resident and domiciled in the UK ITEPA section 15(1) taxes the full amount of any general earnings ‘for’ the tax year while section 15(2) refers to the full amount received in a tax year as being an amount of taxable earnings from the employment in that year. This is supplemented by section 16 which states that general earnings are ‘for’ a particular year if they are earned in, or otherwise in respect of, a particular period. All this is by way of preamble to section 18 which tells us when money earnings are received and section 19 which deal with the receipt of non-money earnings. |
The old law referred, more simply, to the full amount of emoluments received in the year in respect of the office or employment concerned.34 |
Under section 18 earnings in money are to be treated as received at the earlier of (a) when the payment is made of, or on account of, the emoluments, and (b) when the person becomes entitled to payment of, or on account of, emoluments.35 The meaning of the expression ‘on account of’ is not amplified. Where the person becomes entitled to payment but does not receive the payment, eg through the insolvency of the company, there is no provision giving relief.36 Similar rules also apply to PAYE.37 Since this test uses entitlement to payment as well as actual payment as tests of liability it is not really a receipts basis at all, but a mixture of receipts and earnings basis. Its importance is that it rejects decisively the old law under which the payment would be treated as income of the period during which the services were rendered, and a payment made in later year would be backdated. |
14A.2.2 Directors |
Because directors can control how they are paid, three special rules apply: |
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