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Income Tax (Earnings and Pensions) Act 2003

Section 322: Suggestion awards: “the permitted maximum”

1353.This section provides the level, “the permitted maximum”, at or below which a suggestion award is not liable to tax.

1354.It derives from ESC A57. See Change 78 in Annex 1.

1355.Subsection (1) gives the permitted maximum for an encouragement award.

1356.Subsection (2) provides that the permitted maximum for a financial benefit award where no previous award has been made for that suggestion is the suggestion maximum or, where the award is made to more than one person, the appropriate proportion of that maximum award. The suggestion maximum is given at subsection (4) and “the appropriate proportion” is defined at subsection (6).

1357.Subsection (3) provides that the permitted maximum for a financial benefit award where an award has already been made for that suggestion is the residue of the suggestion maximum or, if more than one such award has been made previously, the appropriate proportion of that residue. “The residue of the suggestion maximum” is defined at subsection (6).

1358.Subsection (4) gives the suggestion maximum for financial benefit awards. This is the maximum of £5,000 or the financial benefit share (defined at subsection (5) ). The power to alter the limit in this provision is contained in section 716.

1359.Subsection (5) defines the “financial benefit share” as the greater of half the financial benefit likely to arise within the first year of the adoption of the suggestion or one-tenth of the financial benefit for the first five years after its adoption.

1360.Subsection (6) defines “the appropriate proportion” and “the residue of the permitted maximum” which are used at subsections (2) and (3). It also defines “the total previous exemption” used in the definition of “the residue of the permitted maximum”.

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