SE00600 - Emoluments of employees and office holders: emoluments are not chargeable unless they are 'from the employment'

Section 19(1)1 ICTA 1988

An employee may receive something which is clearly a 'profit' to them, and therefore an emolument. For example, most money payments are emoluments. But a payment will not be chargeable under Section 19(1)1 ICTA 1988 if it comes to the employee from a source other than the employment. The fact that the employer or ex-employer paid it is not conclusive that it is 'from the employment'.

For example, a wedding gift from an employer to an employee would not normally be chargeable under Section 19(1)1. Looking at it from the employee's point of view they do not receive it by virtue of being an employee but because of an event unconnected with their employment - their marriage.

In Laidler v Perry (42TC351), Lord Reid put succinctly the question which has to be answered in all cases

'Did this profit arise from the employment? The answer will be no if it arose from something else.' (42TC363).

Judges have tried to explain the meaning of the words 'from the employment' in various ways. As Lord Radcliffe pointed out in Hochstrasser v Mayes (38TC707) their attempts help to illustrate the idea expressed in the words of the statute but they do not replace those words. He went on to say

'For my part I think that their meaning is adequately conveyed by saying that, while it is not sufficient to render a payment assessable that an employee would not have received it unless he had been an employee, it is assessable if it has been paid to him in return for acting as or being an employee.'

In Shilton v Wilmshurst (64TC78), Lord Templeman explained the statutory words in this way

'An emolument 'from employment' means an emolument ‘from being or becoming an employee.' The authorities are consistent with this analysis and are concerned to distinguish in each case between an emolument which is derived 'from being or becoming an employee' on the one hand, and an emolument which is attributable to something else on the other hand.'

Note that to be chargeable under Section 19(1)1 a payment does not have to be 'remuneration' or 'a reward for services' (see SE00610).

See also:

• important principles (see SE00610)
• lump sums chargeable under Section 19(1)1 (see SE00620)
• list of particular items (see SE01000).