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Are funeral contribution costs Ex Gratia

An employee has been given a £2000 contribution towards travel costs to father funeral

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It has been agreed that the company will pay 2k towards an employees travel costs abroad to attend his fathers funeral. This isn't contractual or in consideration for any additional work but simply reflective of the company's ethos of looking after its staff.

 

Does this qualify as ex gratia or would I need to treat as a salary payment and  gross up payment so he receives 2k net.

Can find much info on ex gratia other than for redundancy/ terminations

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By David Ex
22nd Sep 2021 13:13

Not sure but arguably (and ironically) the fact that the gesture is “simply reflective of the company's ethos of looking after its staff” maybe makes it rather more linked to the employment and so taxable than might have otherwise been the case.

What’s the history of similar payments over the years - regularity/ reason/ amount?

EDIT: Think I was getting carried away thinking of gifts, if it’s cash then you’re stuffed, I believe.

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By Paul Crowley
22nd Sep 2021 13:36

Is Ex Gratia a term recognised in tax?
Would he get the money if he was not an employee?
Do Christmas cash ex gratia payments get taxed?

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By Tax Dragon
22nd Sep 2021 13:38

Sounds ex gratia to me.

But as Paul says, so what?

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By The Dullard
22nd Sep 2021 13:48

Lord Reid: "is it paid by reason of the employment or by reason of something else..."

Unless the employee is related to the employer, or the employer routinely pays the travel expenses of non-employees travelling to the funerals of relatives, I'd suggest that it was paid by reason of the employment. Thus is "a gratuity or other profit or incidental benefit...or anything else that constitutes an emolument of the employment."

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Replying to The Dullard:
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By Tax Dragon
22nd Sep 2021 14:33

(quoting from s62(2)(b) and (c) ITEPA 2003, in case you were wondering, @OP)

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By Hugo Fair
22nd Sep 2021 17:36

Agree with others that it should be treated as earnings (whatever your moral viewpoint and irrespective of the 'ex gratia' angle that seems irrelevant to me outside of redundancy/termination situations).

But before deciding what to do, note the comment in the first response where David says "if it’s cash then you’re stuffed" - by which I presume he means it would then have to go through PAYE via RTI in the pay period when it it is paid out. Not much room for manoeuvre there ... and you'd need to do the "gross up payment so he receives 2k net" calc (which may not be as simple as you think if you want to ensure he doesn't suffer any disadvantage elsewhere - UCs, Child Benefit, etc).

However if the employer pays for the flight and gives the ticket to employee then it can be treated as a BiK - and reported via next year's P11D (which will result in a revised tax code being issued that collects the extra tax over a full tax year).
It also, potentially, opens up the opportunity for the employer to agree a PSA with HMRC - in which case the tax due is paid by the employer.

These are only some of the inter-related options in this scenario, so it would be a good idea to approach a Payroll specialist ... or, if the above makes sense to you, pick one of the options and give it a go yourself.

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Replying to Hugo Fair:
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By More unearned luck
22nd Sep 2021 21:17

For "if the employer pays for the flight" read "if the employer contracts with the airline". Mere payment of the employee's pecuniary liabilities doesn't solve the problem.

I apologise for my pedantry.

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