2024欧洲杯赛程

An employer cannot typically pay tax on an employee鈥檚 behalf without incurring a further tax liability (see EIM00580).

If an employer wishes to make a 鈥渇ree of tax鈥� payment to an employee, they can 鈥済ross up鈥� the employee鈥檚 pay.

This is a system by which the employer increases the gross amount of the remuneration, so that the net amount (after tax) equals the amount the employee was expecting to receive.

The employer must deduct tax from the increased gross amount.

HMRC officers are not primarily involved because the question is one of interpreting an agreement between employer and employee.

Example

An employer has agreed to reward an employee with a bonus worth 拢500 after deduction of income tax. The employee pays tax at the basic rate.

If the bonus is 拢500, the employee will only receive 拢400 net after deduction of tax:

拢500 - 拢100 income tax (at 20%) = 拢400

The employer must 鈥済ross up鈥� the bonus by increasing the gross amount to 拢625 so that the employee receives 拢500 net:

拢625 - 拢125 income tax (at 20%) = 拢500

Note that this is an illustrative example, and in practice the employer would also be required to deduct National Insurance Contributions from this payment.