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Finance Act 2014

New Section 312A

76.New subsection (1) provides that the income tax exemption applies to qualifying bonus payments made in a tax year to employees or former employees of a company.

77.New subsection (2) sets the maximum amount of the qualifying bonus payment that is exempt from income tax (the “exempt amount”) at £3,600.

78.New subsection (3) provides that, where an employee receives a qualifying bonus from more than one employer in a tax year, the exempt amount in subsection (2) applies separately to the total payments made by each employer.

79.New subsection (4) provides an exception to subsection (3).  Where an employee or former employee receives a bonus from two or more employers who first make a bonus payment when they are part of the same group, the exempt amount applies to the total amount of the bonuses received from all employers in the group, instead of applying separately in relation to each employer.

80.New subsection (5) provides that where an employee has received a qualifying bonus from a company which was a member of a group of companies at the time it first made a payment for the year, that employer will be treated as remaining a member of the group until the end of that tax year even if it subsequently leaves the group.  This is relevant in determining if the aggregate of qualifying bonus payments received in a tax year from the group exceeds the exempt amount (see subsection (4) above).

81.New subsection (6) sets out how the exempt amount should be applied when more than one qualifying bonus is received in the same tax year by an employee.  It provides that the exempt amount should be applied to each bonus in the order they were made to determine if and when the exempt amount has been exceeded.

82.New subsection (7) explains how the exempt amount should be applied when two (or more) qualifying bonuses are made on the same day.  It provides that the exempt amount (or the unused amount of the exempt amount) should be shared equally between each of the payments received on the same day.

83.New subsection (8) provides that where a qualifying bonus is paid by different employers (who are not members of the same group) ordering rules in subsections (6) and (7) apply separately.

84.New subsection (9) provides an Order-making power enabling the Treasury to increase or reduce the exempt amount.  However, where the amount is to be reduced, new subsection (10) specifies that the draft statutory instrument must be laid before and approved by the House of Commons.

85.New subsection (11) defines the term “chargeable amount” as being the amount of the bonus payments that would have been taxable if not for the exemption. This term is referred to in subsection (2).

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