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HMRC internal manual

Employment Income Manual

Employment income: earnings from employment: sum paid to a continuing employee in respect of a variation in duties or terms of employment

Section 62 ITEPA 2003

An employer may alter the duties an employee has to perform and make a payment to the employee for accepting the change. Such a payment is taxable as earnings within Section 62ITEPA 2003. It is referable to the employment and to nothing else. So it is from the employment (see EIM00600). It is similar to a sum paid to an employee for continuing to serve in his employment (see EIM00650).

Payments related to changes in duties are often made following agreements with trade unions under which an employer seeks to improve efficiency by redefining duties. Such payments are taxable as earnings within Section 62, for the reasons given above.

The same rule applies to changes in other matters connected only with the employment. For example, payments made to persuade employees to change from being paid in cash to being paid by direct credit to a bank account. Here again, the payment is referable to the employment and nothing else.

Dealing with disputes

Employers and employees may be reluctant to accept that such change payments are from the employment, and thus taxable as earnings within Section 62. In such a case, the Inspector could point out that, if Section 62 did not apply, the payment would nevertheless be treated as earnings under the benefits code (see EIM20006 onwards). The benefits code applies to cash payments as well as to benefits in kind (see EIM21006). And a benefit provided by the employee’s employer is deemed to be provided by reason of the employment (see EIM20502).

Both Section 62 and Section 201 (the benefits code) take precedence over any possible charge under Section 401 (see EIM13000).