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HMRC internal manual

Employment Income Manual

Employment income: gifts and other voluntary payments

Section 62 ITEPA 2003

A gift in cash or a gift with a money’s worth (EIM00530), or other voluntary payment to an employee, counts as earnings within Section 62 ITEPA 2003 when it arises from the employment (see EIM00600 and EIM00610). If the gift is in the form of goods or services that have no money’s worth, it is not taxable as earnings under Section 62 but it may be taxable under the benefits code (EIM20006). But it may be exempt from tax under Section 324 if it is a gift of goods or services, (or a voucher or token only capable of being used to obtain goods) made by someone other than the employer (see EIM21715).

Four cases illustrate the type of situation where gifts can be chargeable.

In Herbert v McQuade (4TC489) a clergyman received a grant from a fund set up to augment the income of poorly paid incumbents. Those making the grant took into account the duties, incomings and outgoings of the benefice - not the personal circumstances of the particular clergyman. It was held to be a chargeable emolument. Stirling LJ said

‘… a profit accrues by reason of an office when it comes to the holder of the office as such - in that capacity - and without the fulfilment of any further or other condition on his part’. (page 501)

In Cooper v Blakiston (5TC347) a vicar was given the collections made in his church on Easter Sunday - the longstanding practice in the Church of England. These Easter offerings’ were held to be chargeable emoluments. The Lord Chancellor said

‘Where a sum of money is given to an incumbent substantially in respect of his services as incumbent, it accrues to him by reason of his office. Here the sum of money was given in respect of those services. Had it been a gift of an exceptional kind, such as a testimonial, or a contribution for a specific purpose, as to provide for a holiday, or a subscription peculiarly due to the personal qualities of the particular clergyman, it might not have been a voluntary payment for services, but a mere present’ (page 355).

In Denny v Reed (18TC254) the managing clerk of a firm of stockbrokers had a fixed annual salary but received additional sums after the end of the firm’s financial year at the sole discretion of the partners. There was no evidence the payments were made in respect of anything other than the work done for the firm and they were held to be chargeable emoluments.

In Moorhouse v Dooland (36TC1) a cricketer was entitled to have collections made from spectators for meritorious performance with bat or ball. The collections he received were held to be chargeable emoluments. He was only receiving what he was entitled to under his contract (see EIM00610).

As regards:

  • tips and gratuities, see EIM07900
  • long service testimonial awards, see EIM01500
  • gifts not taxable as earnings, see EIM01460.