Bonus Clawback

Dear HMRC Community, I am reaching out for guidance on a specific aspect of declaring negative earnings in relation to the repayment of a bonus, which was a condition of my employment contract upon leaving my company. To set a clear example, let's say the bonus was £100,000, and given my tax bracket, it was taxed at the 45% rate, along with £2,000 of NIC. Upon my departure from the company, I was required to repay this bonus. My understanding is that adjustments to the original payment records by my employer are not permissible since those records were accurate at the time. Therefore, it seems I must declare this repayment as negative earnings via Self-Assessment. My key question centers on the criteria for these repayments to qualify as negative earnings: - Does the mere existence of a debt obligation to repay the bonus upon leaving the company suffice to declare it as negative earnings, or are there specific actions I must take beyond acknowledging the debt? Further inquiries include: - Is repaying the net amount of the bonus sufficient evidence that the bonus was effectively clawed back, or is it necessary to repay the gross amount to properly declare negative earnings? - Given the large sums involved, repaying the gross amount poses a significant challenge. How does one navigate this issue if advancing such a large amount is not feasible? I seek to ensure compliance with all relevant tax regulations and appreciate any guidance on how to proceed with declaring negative earnings related to the repayment of a bonus under these circumstances. Thank you for your support. source: https://www.gov.uk/guidance/checking-how-to-claim-a-tax-refund-for-negative-earnings

Hi,

You declare negative earnings on the employment page SA102. The Self Assessment guidance advises, If you’ve had to pay back money to your employer due to a contractual agreement (often known as claw back), reduce the amount of pay in box 1 by the amount paid back. If the result is a negative amount, enter zero in box 1. Include the negative amount, but as a positive figure, in the ‘Post-cessation trade relief and certain other losses’ box, box 6 in the ‘Other Tax Reliefs’ section on page Ai2 of the Additional information page (SA101). Enter a note to explain why you have done this in box 19 ‘Any other information’ on the SA100. You can see the guidance here:

Employment notes

Thank you.
 

Since the full gross amount of the bonus and full tax amount are included on my P45, does the employer need to provide a letter stating that I refunded the bonus? Or what would be the backup to show that I indeed refunded the full gross to my employer?

Hi Olus,
If you have repaid the bonus to your employer and your P45 is incorrect you should ask your employer to amend the P45 details on the payroll system and submit the
amended RTI details to HMRC so your tax records can be updated.
As the P45 is incorrect you would not hand this into a new employer, you would need to complete a form P46 (Starter declaration form) so your tax records can be updated.
Thank you.