Where an employee is entitled to commission (that is earnings
from his or her employment) but requests that it should be, or
allows it to be, invested in the policy that earned the commission
(or in any other policy or investment) an application of commission
due occurs. This is so whether or not it is the employee's own
policy or investment. The full amount of the commission applied
remains chargeable on the employee as earnings (Parker v Chapman
(13TC677), see also
EIM42705). An employee's commission that
is earnings from his or her employment and which is invested as a
requirement of the employer, or of the person from whom it is due,
is similarly chargeable (Smyth v Stretton (5TC36)).
If the employee is not entitled to commission as such but
receives rights from his or her employment that can be realised or
turned to account, the charge will be the money's worth of those
rights (Abbott v Philbin (39TC82), see also
EIM00530). Where commission or other
taxable income is provided in the form of readily convertible
assets rather than cash, PAYE applies under Part 11 Chapter 4 ITEPA
2003 (see
EIM11800 onwards).
Exceptionally, where an employee receives rights that are not
of the type mentioned above, there may still be a liability to tax
under the benefits code. For example, a commission invested by the
employer will be deemed to be provided by reason of the employment
(Section 201(3) ITEPA 2003, see
EIM20502) and so will give rise to a
charge. A commission invested by a third party will only give rise
to a charge if it is provided by reason of the employment. Usually,
the charge in either case will be the amount of commission invested
by the employer or third party.
Where commission is invested for the benefit of a member of
the family or household of an employee and the employee is not in
an excluded employment (see
EIM20007) lower paid, the employee will
be liable to a charge under Section 201 in the same way as if the
investment had been made for his or her own benefit.
