EIM01130 | Financial loss allowances: lost employment income

Section 299A ITEPA 2003

As shown at EIM01125, section 299A of ITEPA provides an exemption from income tax on payments made to voluntary office-holders where those payments are made solely to compensate the person for lost employment income.

“Lost employment income” means the difference between:

• the amount of employment income, after deduction of tax and National Insurance contributions (NICs), that the person would have received from their employment for the period during which they carried out duties of the office

and

• the amount of employment income, after deduction of tax and NICs, that they did receive from the employment for that period

For examples of the calculation of lost employment income, see EIM01135.

Bonus payments

The calculation of lost employment income, whether an exact figure as shown in example 1 at EIM01135 or a reasonable estimate as shown in example 2, should be based on a person’s normal salary pattern and amounts. Any bonus payments, and the tax and NICs amounts associated with those bonuses, should therefore not be taken into account in calculating the amount of lost employment income.