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HMRC internal manual

Employment Income Manual

Tax treatment of insurance agents: commission received by agents who are employees

Statement of Practice (SP) 4/97 (see EIM64605) deals with amounts that may, in the situations discussed, be taxed as earnings within Section 62 ITEPA 2003 (see generally EIM00510 onwards) or as benefits within Section 201 (see EIM21001 onwards). Sometimes liability to tax as employment income may arise under other provisions, such as the vouchers legislation or Section 403 ITEPA 2003 (see, respectively, EIM16010 onwards and EIM13000 onwards). These provisions are not within the scope of the Statement but will have to be considered where there is no liability under the main provisions considered here.

SP4/97 applies to all sales commission to which an employee becomes entitled.

A commission that counts as earnings from an employment is always chargeable to tax as employment income. Where a benefit is provided by reason of employment a tax charge arises if there is a cost in providing that benefit. Such commission may occur in connection with a policy sold to a third party or in connection with an employee’s own policy. Liability may arise on policies sold by the employer or by a third party, for example, another company within the same group as the employer. SP4/97 provides an explanation of the taxation of commission and discounts received by an employee in respect of the purchase of goods, investments or services from an employer.