SE01100 - Emoluments of employees and office holders: examination grants to employees

Section 19(1)1 and Section 154 ICTA 1988

Following the decision in Ball v Johnson (47TC155) examination awards paid by employers to employees for passing a recognised examination are not regarded as chargeable under Section 19(1)1 ICTA 1988 (see SE00510) where all the following conditions are satisfied.

• The award is made at the discretion of the employer (that is, the employer is under no legal obligation to make the award).
• It is not part of the employee's duties to sit and pass the examination (for example, dismissal does not automatically follow failure).
• The award takes the form of a lump sum paid once and for all.
• The award is reasonable in amount and there is no evidence to suggest that it represents disguised remuneration.
• The employee is not within Part V Chapter II (see SE20100).

Where the employee has emoluments at the rate of £8,500 a year or more a charge will arise under Section 154 ICTA 1988 and the payment should be reported on form P11D.

Where one or more of the above conditions is not satisfied but the employee persists with a claim that an award is not chargeable, submit the papers to Personal Tax (Technical), Solihull.

Special increments of salary granted on passing examinations are chargeable in the ordinary way.

As regards promotion examination allowances to police constables and sergeants, see SE68130.