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HMRC internal manual

Self Assessment Manual

Returns: individuals returns: payments to employees involved in accidents

Where an employee injured at work pursues a claim for compensation for loss of earnings, and gives an undertaking to the employer to repay any sick pay ultimately covered by such compensation, the sick pay will take the character of an advance from the employer rather than earnings.

Any PAYE applied to those payments can be refunded to the employee in-year. For a closed year, the position can only be rectified by bringing the employee within SA for that year only.

Where refund of an advance is made in the year after the year of advance, the taxpayer should make the following entries on the Employment supplementary page

  • Box 1 – the figure of pay as shown on form P60 less the gross amount of the advance
  • Box 2 – the tax deducted as shown on form P60