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TaxRobin
TaxRobin, Tax Consultant
Category: Tax
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Experience:  International tax
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Hi, I have resigned fro a company so need to pay back an advance

Resolved Question:

Hi, I have resigned fro a company so need to pay back an advance bonus which is fine they are asking for the gross bonus amount whereas I've obviously received this net of income tax and NI. How do I deal with this as i will potentially be out of pocket approximately £5,000 by repaying the gross amount.
Submitted: 3 years ago.
Category: Tax
Expert:  TaxRobin replied 3 years ago.
Hello and thank you for allowing me to assist you.
In the case involving HMRC and Jul***** *****, an employee of JLT Risk Solutions, the court ruled in favour of Martin that his repayment was to be treated as negative earnings, thus reducing his taxable pay for the year the gross bonus was paid back.
The Upper Tribunal said that a payment from the employee to the employer or certain third parties would fall within this category if that payment had "the attributes of positive taxable earnings ... with suitable adjustments".
The payment would have to arise directly from the employment and not for some other reason, the tribunal judge said. On the circumstances of this case, the repayment of the bonus could be classed as negative taxable earnings and so employment loss relief could apply.
The way in which a claim for negative earnings is given is to reduce an employee's taxable pay for the year the gross bonus is repaid. This would typically give rise to a tax repayment. If an employee's income in that year is less than these negative earnings the excess can generally be deducted from the previous year's income.
Customer: replied 3 years ago.

Hi I have read that case but i wasn't clear whether I would get a tax refund. In my mind how can you possibly pay tax on monies not earned as effectively a bonus repayment just puts you back in the position of it not being paid. If you have to pay tax on something you don't receive that is just morally wrong.

You used the word typically so can i assume that I might not get back the tax and NI I have already paid on the bonus payments received?

Expert:  TaxRobin replied 3 years ago.
It is so new that HMRC has still denied some requests while they were deciding on appeal.
You will get back the tax it is just not a published procedure yet.
I think it will be against the tax for the current year and your employer will be required to reimburse.
Customer: replied 3 years ago.

Do you know when that procedure will come into force?

Expert:  TaxRobin replied 3 years ago.
No not yet. I have been checking every where possible.
Other countries have had this and dealt with it in the reporting of the return in the year the repayment happens. The income for that year is reduced by the repayment amount.
I was checking to see if NI was being changed at all to come into line with the tax. So far I have not been able to ascertain any thing on that provision exactly.
It could be that end of year reporting will be allowed for the corrections (a bit like for directors but in reverse so instead of extra taken out less would be taken out).
I sincerely ***** ***** had more to tell.
Customer: replied 3 years ago.

Thank you for your help

Expert:  TaxRobin replied 3 years ago.
You are most welcome.
My goal is to give you excellent service.
The situation is still just too new to speak with authority.
TaxRobin and other Tax Specialists are ready to help you