SE03050 - Emoluments of employees and office holders: profit-related pay

Tax relief for employees who receive profit-related pay (PRP) was introduced in Finance Act (No2) 1987. PRP is that part of pay which varies in line with the movement in profits of the business, or part of the business, in which the employee works.

To qualify for tax relief, payments of PRP must be made under a PRP scheme which complies with the legislation and which has been registered by the Inland Revenue.

Payments of PRP are dealt with by the employer as a normal part of PAYE operation. Tax relief is given by the employer under a net pay arrangement similar to that used for giving tax relief for superannuation contributions or payroll giving donations.

PRP is administered centrally by the Profit-related Pay Unit who will notify the PAYE District(s) concerned when an employer's scheme has been registered.

Ending of PRP

No further tax relief is available under PRP after 1 January 2000 unless the scheme was already registered in 1988. In this case relief of £1,000 will be available until the end of the 12 month period.

All enquires or requests for information about PRP should be referred immediately to:

Profit-related Pay Unit
Inland Revenue
St Mungo's Road
Cumbernauld
Glasgow G67 1YZ
Telephone 01236-736121