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HMRC internal manual

Employment Income Manual

The year that earnings are “for” - arrangement of guidance

In 2007 and 2008, HMRC consulted with professional advisers with particular expertise regarding the treatment of foreign nationals coming to work in the UK and UK residents leaving the UK to work abroad. Many of the advisers’ clients have complex remuneration packages. Some are members of Long Term Incentive Plans or participants in other deferred remuneration schemes. The aim of the exercise was to establish principles for determining the tax year that earnings, delivered by these arrangements, are “for”.

The guidelines set out on the following pages were adopted by HMRC with effect from 28 February 2008. They are intended to be comprehensive but do not claim to cover every plan and set of circumstances that will arise.

EIM40011 Approach to determining the year that earnings are “for”
EIM40012 Annual bonuses awarded for meeting corporate, team or personal targets
EIM40013 Bonuses and deferred remuneration plans – the effect of conditionality and employer’s discretion
EIM40014 Long Term Incentive Plans and Deferred Remuneration
EIM40015 The year that awards from Long Term Incentive Plans and other deferred remuneration arrangements are “for”
EIM40016 Staged vesting

The guidance sets out general principles and indicates the views HMRC is likely to take in specified circumstances. It is intended to aid and inform fact finding and decision making. It is not a substitute for obtaining all of the relevant information and exercising good judgment by applying the principles to the facts. This is not an easy task as you may be required to balance one set of conditions against others. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Transitional arrangements

HMRC published the following statement on 18 September 2008:

“For the avoidance of doubt HMRC was able to confirm that where Tax Returns were submitted prior to 18 October 2007 on the basis of the established HMRC position (which regarded conditionality as the determinant factor over any specific performance period) they will not seek to challenge the Returns on that point. Furthermore, if after 18 October 2007 any individual submitted a Tax Return for 2006/7 (or earlier) in accordance with the HMRC guidance given on 18 October 2007 HMRC will not seek to challenge the Return on this point, but if the individual wishes to change the basis and adopt the position clarified on 28 February 2008 HMRC would not object to a taxpayer amendment provided that this is made within the available window.”