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E4.451 Tax-free remuneration—case law

The cases cited in this article relate to liability under the legislation that had effect before 2003/04, in other words, the Schedule E legislation rather than the rewritten legislation in ITEPA 2003 (see E4.101). Accordingly, since the principles described here were established, not only have the statutory provisions changed, but so has the terminology used; see E4.401. However, the overall effect of existing rules is not changed by ITEPA 2003; see E4.101. Indeed, to ensure that existing case law will apply to anything that counts as an emolument but is not listed in the definition of 'earnings' introduced by ITEPA 2003, there is a single reference to the term 'emolument' in that definition; see E4.401.

An agreement to pay a sum free of income tax imposes an obligation to pay a gross sum calculated, unless the context otherwise requires, according to the formula 'such a sum as after deduction of income tax will amount to the agreed sum'¹. Where remuneration is paid to an employee free of income tax or the employer pays