Explanatory Note
(This note is not part of the Regulations)
Section 590C(1) of the Income and Corporation Taxes Act 1988 (“the Act”) provides that in arriving at an employee’s final remuneration for the purposes of section 590(3)(a) or (d) of the Act, any excess over the permitted maximum figure (“the earnings cap”) for the year of assessment in which the employee’s participation in the scheme ceases shall be disregarded.
The earnings cap is calculated in accordance with sections 590C(2) – (5A) of the Act, as amended by section 107(4) and (5) of the Finance Act 1993. Section 590C(5) of the Act provides that if the retail prices index for the September preceding the year of assessment is higher than it was for the previous September, the earnings cap is calculated by increasing the previous year’s figure by the same percentage as the percentage increase in the retail prices index, and, if the amount is not a multiple of £600, rounding it up to the nearest amount which is a multiple of £600.
The retail prices index is defined in section 833(2) of the Act, as amended by paragraph 22 of schedule 2 to the Transfer of Functions (Registration and Statistics) Order 1996 (S.I. 1996/273), as the “general index of retail prices (for all items) published by the Office for National Statistics”.
The retail prices index was 177.6 for September 2002, and 174.6 for September 2001; a percentage increase of 1.7 per cent. Applying the calculation produces an amount of £99, 000 for the earnings cap for the year of assessment 2003-04.