PART VPROVISIONS RELATING TO THE SCHEDULE E CHARGE
CHAPTER IIIPROFIT-RELATED PAY
The relief
171Relief from tax
1
One half of any profit-related pay to which this section applies shall be exempt from income tax.
2
This section applies to any profit-related pay paid to an employee by reference to a profit period and in accordance with a registered scheme, but only so far as it does not exceed the lower of the two limits specified in the following provisions of this section.
3
The first of the limits referred to in subsection (2) above is one fifth of the aggregate of—
a
the pay (but not any profit-related pay) paid to the employee in the profit period in respect of his employment in the employment unit concerned (or, if the employee is eligible to receive profit-related pay by reference to part only of the period, so much of his pay, but not any profit-related pay, as is paid in that part); and
b
the profit-related pay paid to him by reference to that period in respect of that employment.
4
The second of the limits referred to in subsection (2) above is £3000 (or, if the profit period is less than 12 months, or the employee is eligible to receive profit-related pay by reference to part only of the profit period, a proportionately reduced amount).
172Exceptions from tax
1
Profit-related pay shall not be exempt from income tax by virtue of section 171 if—
a
it is paid to an employee in respect of his employment in an employment unit during a time when he also has another employment; and
b
he receives in respect of that other employment during that time profit-related pay which is exempt from income tax by virtue of that section.
2
Subject to subsection (3) below, profit-related pay in respect of which no secondary Class 1 contributions under Part I of the [1975 c. 14.] Social Security Act 1975 or Part I of the [1975 c. 15.] Social Security (Northern Ireland) Act 1975 are payable shall not be exempt from income tax by virtue of section 171.
3
Subsection (2) above shall not apply to profit-related pay in respect of which no Class 1 contributions are payable only because the employee’s earnings are below the lower earnings limit for such contributions.