UUֱ

Payment for loss of earnings

Produced by a Tolley Employment Tax expert
Employment Tax
Guidance

Payment for loss of earnings

Produced by a Tolley Employment Tax expert
Employment Tax
Guidance
imgtext

Introduction

Employees may lose income as a result of not attending work for a variety of reasons. In some cases, employees may be paid by a third party for loss of their earnings. HMRC refer to these payments as ‘Financial Loss Allowances’ or ‘Lost Time payments’ in their guidance. Examples of a loss of earnings include being required to attend the following where the employer does not pay their employee for the working hours they miss as a result:

  1. jury service

  2. trade union meetings

The PAYE treatment of payments received depends on whether the amount of compensation is based on the actual loss of employment income.

HMRC guidance is available from EIM01120 and NIM02220 with examples at EIM01135. See Simon’s Taxes E4.747A and Division E4.8.

Exemptions for compensation for loss of earnings

There are two exemptions in place with allow an individual to receive compensation for loss of earnings without any tax or NIC being due. There are as follows:

  1. voluntary office-holders in ITEPA 2003, s 299A

  2. Voluntary public service in

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™
Powered by
  • 17 Jun 2025 06:21

Popular Articles

Outright gifts

Outright giftsAn outright gift is the most straightforward type of gift. It simply involves the outright transfer of property from one person to another with no conditions attached.This type of gift is most suitable for clients who want to pass over modest amounts, or give to responsible and capable

14 Jul 2020 12:22 | Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP Read more Read more

Payment of tax due under self assessment

Payment of tax due under self assessmentNormal due dateIndividuals are usually required to pay any outstanding income tax, Class 2 and Class 4 national insurance, and capital gains tax due for the tax year by 31 January following the end of the tax year (ie 31 January 2025 for the 2023/24 tax year).

14 Jul 2020 12:52 | Produced by Tolley Read more Read more

Payroll record keeping

Payroll record keepingUnder SI 2003/2682, reg 97, “...an employer must keep, for not less than 3 years after the end of the tax year to which they relate, all PAYE records which are not required to be sent to [HMRC]...”. Reasons for keeping the records include:•being able to calculate tax and

14 Jul 2020 12:52 | Produced by Tolley in association with Ian Holloway Read more Read more