PART IVU.K.INCOME AND CAPITAL

CHAPTER IIIU.K.EMPLOYED EARNERS

Earnings of employed earnersU.K.

19.—(1) Subject to paragraph (2), “earnings” means in the case of employment as an employed earner, any remuneration or profit derived from that employment and includes—

(a)any bonus or commission;

(b)any holiday pay except any payable more than 4 weeks after termination of the employment;

(c)any payment by way of a retainer;

(d)any payment made by the claimant's employer in respect of any expenses not wholly, exclusively and necessarily incurred in the performance of the duties of the employment, including any payment made by the claimant's employer in respect of—

(i)travelling expenses incurred by the claimant between his home and place of employment;

(ii)expenses incurred by the claimant under arrangements made for the care of a member of his family owing to the claimant's absence from home;

(e)any award of compensation made under section 68(2) or 71(2)(a) of the Employment Protection (Consolidation) Act 1978 M1 (remedies and compensation for unfair dismissal);

(f)any such sum as is referred to in section 18(2) of the Social Security (Miscellaneous Provisions) Act 1977 M2 (certain sums to be earnings for social security purposes);

[F1(g) any statutory sick pay under Part I of the Social Security and Housing Benefits Act 1982 M3 ;

(h)any statutory sick pay under Part II of the Social Security (Northern Ireland) Order 1982.]

[F2(i)the amount of any payment by way of a non-cash voucher which has been taken into account in the computation of a person’s earnings in accordance with regulation 18(22) to (25) of the Social Security (Contributions) Regulations 1979.]

(2) Earnings shall not include—

(a)subject to [F3paragraphs (3) and (4)], any payment in kind;

(b)any payment in respect of expenses wholly, exclusively and necessarily incurred in the performance of the duties of the employment;

(c)any occupational pension.

[F4(d)any statutory maternity pay or a corresponding benefit under any enactment having effect in Northern Ireland.]

[F5(e)any statutory paternity pay or a corresponding benefit under any enactment having effect in Northern Ireland.]

(3) Where living accommodation is provided for a claimant by reason of his employment, the claimant shall be treated as being in receipt of weekly earnings of an amount equal to—

(a)where no charge is made in respect of the provision of that accommodation, £12;

(b)where a charge is made and that weekly charge is less than £12, the amount of the difference,

except that where the claimant satisfies the [F6appropriate officer] that the weekly value to him of the provision of that accommodation is an amount less than the amount in sub-paragraph (a) or (b), as the case may be, he shall be treated as being in receipt of that lesser value.

[F7(4) Paragraph (2)(a) shall not apply in respect of any non-cash voucher referred to in paragraph (1)(i).]

[F8(5) An employed earner shall not be treated as being in receipt of earnings in any assessment period as long as she is entitled to maternity allowance at the date of the claim.

(6) An employed earner shall not be treated as being in receipt of earnings in any assessment period as long as she is entitled to statutory maternity pay at the date of the claim and is neither receiving nor expecting to receive at that date extra statutory maternity pay from her employer.]

Calculation of net earnings of employed earnersU.K.

20.—[F9(1) For the purposes of regulation 14 (normal weekly earnings of employed earners) the earnings of a claimant to be taken into account shall be his average weekly net [F10earnings and] where an estimate of earnings has been made in his case, as estimated, and those weekly net earnings shall be determined in accordance with the following paragraphs.]

(2) There shall be disregarded from a claimant's net earnings, any sum, where applicable, specified in Schedule 1.

(3) [F11A claimant’s net earnings shall, except where paragraph (4) [F12or (4A)] applies, be calculated by taking into account his gross earnings from that employment] F13..., less—

(a)any amount deducted from those earnings by way of—

(i)income tax;

(ii)primary Class 1 contributions under the Social Security Act M4; and

(b)one-half of any sum paid by the claimant [F14in respect of a pay period] by way of a contribution towards an occupational or personal pension scheme; [F15and

(c)the net amount of bonus or commission (if any) which is paid separately from his other earnings or is paid in respect of a period longer than the pay period relating to the other earnings with which it is paid and that net amount shall be the gross amount of that bonus or commission after deducting from it sums calculated in accordance with paragraphs (a) to (c) of regulation 20A (calculation of bonus or commission).]

(4) Where the earnings of a claimant are [F16estimated under paragraph (6)][F17, (6A) or (6B)] of regulation 14 (normal weekly earnings of employed earners), his net earnings shall be calculated by taking into account those earnings over [F18the period in respect of which the estimate is made], less—

(a)an amount in respect of income tax equivalent to an amount calculated by applying to those earnings [F19the lower rate or, as the case may be, the lower rate and the basic rate of tax] in the year of assessment in which the claim was made less only the personal relief to which the claimant is entitled under sections 8(1) and (2) and 14(1)(a) and (2) of the Income and Corporation Taxes Act 1970 M5 (personal relief) as is appropriate to his circumstances; but, if the assessment period is less than a year, [F20the earnings to which the lower rate F21... of tax is to be applied and] the amount of the personal relief deductible under this sub-paragraph shall be calculated on a pro rata basis;

[F22(b)where the weekly amount of those earnings equals or exceeds the lower earnings limit, an amount representing primary Class 1 contributions under the Contributions and Benefits Act, calculated by applying to those earnings the initial and main primary percentages applicable at the date of claim in accordance with section 8(1) (a) and (b) of that Act; and]

[F23(c)one half of any sum which would be payable by the claimant by way of a contribution towards an occupational or personal pension scheme, if the earnings so estimated were actual earnings.]

[F24(4A) Where earnings are estimated under paragraph (6ZA) of regulation 14 (normal weekly earnings of employed earner in overseas territory), net earnings shall be calculated by taking into account those earnings over the period in respect of which the estimate is made, less—

(a)the amount (if any) of income tax deducted in respect of those earnings in accordance with the laws of the overseas territory concerned,

(b)the amount (if any) of social security contributions deducted in respect of those earnings in accordance with those laws, and

(c)one half of any sum which would be payable by the claimant by way of a contribution towards an occupational or personal pension scheme, if the earnings so estimated were actual earnings.]

[F25(5) When a claimant’s net earnings have been calculated in accordance with paragraph (3), his average net earnings in respect of his pay period shall be calculated as follows—

(a)the net earnings in each of the pay periods in his assessment period shall be aggregated, that total shall then be divided by the number of pay periods in his assessment period and the resulting amount shall be the average net earnings for his pay period;

(b)where in respect of any pay period, a claimant’s net earnings are twenty per cent. or more higher, or twenty per cent. or more lower, than his average net earnings, those net earnings and that pay period shall be omitted, his assessment period shall be reduced accordingly and his average net earnings shall, subject to sub- paragraph (c), be re-calculated in accordance with sub-paragraph (a);

(c)where the operation of sub-paragraph (b) results in no pay period remaining in a claimant’s assessment period there shall be omitted from the assessment period any pay period in which no earnings are received or in which the net earnings received are for a period longer than his normal pay period and his average net earnings shall be re-calculated in accordance with sub-paragraph (a);

(d)where the operation of sub-paragraph (c) results in no pay periods remaining, paragraph (6) of regulation 14 (normal weekly earnings of employed earners) and paragraph (4) of this regulation shall apply in his case.

(6) Where a claimant’s average net earnings for his pay period have been calculated in accordance with paragraph (5) and his pay period is—

(a)a week, a fortnight or four weeks, his average net earnings for his pay period shall be divided by the number of weeks in that period;

(b)a month, his average net earnings shall be multiplied by 12, the resulting product divided by 52;

(c)any shorter or longer period than those referred to in sub- paragraphs (a) and (b), his average net earnings for his pay period shall be multiplied by 7 and the product divided by the number equal to the number of days in his pay period,

and the resulting amount shall be his average weekly net earnings.]

[F26Calculation of net earnings of directorsU.K.

20ZA.—(1) For the purposes of regulation 14A (normal weekly earnings of directors) the earnings of a claimant to be taken into account shall be his net earnings F27... and those net earnings shall be determined in accordance with the following paragraphs.

(2) There shall be disregarded from a claimant’s net earnings any sum, where applicable, specified in Schedule 1.

(3) A claimant’s net earnings shall, except where paragraph (4) applies, be calculated by taking into account his gross earnings from that employment, less—

(a)any amount deducted from those earnings by way of—

(i)income tax;

(ii)primary Class 1 contributions under the Contributions and Benefits Act; and

(b)one-half of any sum paid by the claimant [F28in respect of a pay period] by way of a contribution towards an occupational or personal pension scheme.

(4) Where some or all of the claimant’s earnings are estimated under regulation 14A(2), those net earnings shall be calculated by taking into account the estimated gross earnings, less—

(a)an amount representing income tax, calculated by applying to those earnings the lower rate or, as the case may be, the lower rate and the basic rate of income tax in the year of assessment in which the claim was made, taking into account the personal relief to which the claimant would be entitled under sections 257(1), 257A(1) and 259 of the Income and Corporation Taxes Act 1988 (personal relief); except that if the period in respect of which the estimate is made is less than a year, [F29the earnings to which the lower rate of tax is to be applied] and the amount of the personal relief allowable under this sub-paragraph shall be reduced pro-rata;

(b)where the weekly amount of those earnings equals or exceeds the lower earnings limit, an amount representing primary Class 1 contributions under the Contributions and Benefits Act, calculated by applying to those earnings the initial and main primary percentages applicable at the date of claim in accordance with section 8(1) (a) and (b) of that Act; and

(c)one-half of any sum which would be payable by the claimant by way of a contribution towards an occupational or personal pension scheme [F30, if the earnings so estimated were actual earnings.]]

[F31Calculation of bonus or commissionU.K.

20A.  Where a claimant’s earnings include a bonus or commission to which [F32paragraph (4)] of regulation 14 (normal weekly earnings of employed earners) applies that part of his earnings shall be calculated by aggregating any payments of bonus or commission and [F33deducting from it —]

(a)an amount in respect of income tax equivalent to an amount calculated by applying to that part of the earnings the basic rate of tax in the year of assessment in which the claim is made; and

[F34(b)an amount representing primary Class 1 contributions under the Contributions and Benefits Act, calculated by applying to that part of the earnings the main primary percentage applicable at the date of claim; and]

(c)one-half of any sum payable by the claimant in respect of that part of the earnings by way of a contribution towards an occupational pension [F35scheme;]]

[F36and dividing the resulting sum by 52.]