EIM06652 - Employment income: exemption for suggestion scheme awards: two or more awards for same suggestion on different occasions: example

Section 322(3) ITEPA 2003

Two employees, A and B, make a joint suggestion under a staff suggestion scheme which satisfies the conditions in section 321 ITEPA 2003 (see EIM06610).Their employer adopts the suggestion, and makes awards to A and B as follows:

31 March 2004: £1,000 to A and £500 to B

30 September 2004: £3,000 to A and £1,500 to B.

The suggestion maximum for the suggestion, calculated in accordance with EIM06630, is £4,500.

2003 to 2004: the total amount awarded in 2003 to 2004 (£1,500) is less than the suggestion maximum (£4,500), so the awards to A and B on 31 March 2004 are wholly exempt. The balance of the suggestion maximum (£3,000) is carried forward to set against the later awards.

2004 to 2005: the apportionment formula in EIM06640 applies.

For employee A, the permitted maximum for the second award is:

(£3,000 ÷ (£3,000 + £1,500)) × £3,000 = £2,000

This is less than the amount of A’s second award (£3,000), so the difference (£1,000) is taxable as employment income in 2004 to 2005.

For employee B, the permitted maximum for the second award is:

(£1,500 ÷ £3,000 + £1,500)) × £3,000 = £1,000

This is less than the amount of B’s second award (£1,500), so the difference (£500) is taxable as employment income in 2004 to 2005.