Including clawback provisions in UK bonus and share plans has, until recently, been undertaken on the assumption that an employee would struggle to get any credit from HMRC for any clawed-back amount. Clawback provisions sometimes expressly take this understanding into account by only requiring repayment of the net amount, thereby accepting that the tax paid is lost.
However, since Julian Martin v HMRC, this reluctant admission that the clawback is of no significance in the tax world might now be unnecessary. The Tribunal allowed a clawed-back amount to be deducted from earnings that year, which created a tax loss which could either be claimed in that tax year or carried back a year. Employers and employees alike will no doubt be interested in this one…
