If an employee performs additional duties for an employer that
the employee is not obliged by the contract of employment to
undertake, any additional payments the employee receives will
normally be taxable as earnings within Section 62 ITEPA 2003 if
they are payments for those services.
In Mudd v Collins (9TC297) a company director negotiated the sale of a branch of the company's business and was paid a lump sum as a commission. He claimed it was a voluntary gift that was not taxable because negotiating the sale was not part of his duties. The judge said (page 300):
"If an officer is willing to do something outside the duties of his office ... and his employer gives him something in that respect, that is a profit; it becomes a profit of his office which is enlarged a little so as to receive it."
The same principle was followed in Shipway v Skidmore (16TC748)
and Lindsay v CIR (41TC661). It would apply, for example, where the
employees of a pharmaceutical company volunteered to test drugs for
payment if the opportunity to do so arose because they were
This principle does not apply where the payment is not for services. For example, in Donnelly v Williamson (54TC636) a school teacher received a car mileage allowance for travelling to parents' evenings - something she was not obliged to do at that time under the terms of her employment. It was not a payment of earnings because she was performing duties outside her contractual duties and it was not in respect of the services she gave.
It is possible for an employee or office holder to tender for work outside their normal duties, not as an employee or office holder but as a self-employed contractor. Any amounts payable in those circumstances will fall to be taken into account as Trading Income in arriving at the profit from the self-employment. They are not employment income. Any question whether a particular engagement amounts to self-employment should be referred to the nominated status officer for advice (see the Employment Status Manual (ESM)).