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Lump-sum payments are treated differently for PAYE income tax purposes, attracting a separate tax calculation as a flat-rate, and so it is important that employers recognise what constitutes a lump sum payment. Income Tax Act 2007, s RD7 determines extra pay as being:

1. Ìý

   •ÌýÌýÌýÌý a payment that is:

2. Ìý
   1. Ìý

      –ÌýÌýÌýÌý made to a person in connection with their employment

   2. Ìý

      –ÌýÌýÌýÌý not a payment regularly included in salary or wages payable to the person for a certain period

   3. Ìý

      –ÌýÌýÌýÌý not overtime pay, and

   4. Ìý

      –ÌýÌýÌýÌý made in one lump sum or two or more instalments, and

3. Ìý

   •ÌýÌýÌýÌý includes a payment described above made:

4. Ìý
   1. Ìý

      –ÌýÌýÌýÌý as a bonus, gratuity or share of profits

   2. Ìý

      –ÌýÌýÌýÌý as a redundancy payment

   3. Ìý

      –ÌýÌýÌýÌý when the person retires from employment, or

   4. Ìý

      –ÌýÌýÌýÌý as a result of a retrospective increase in salary or wages, but only to the extent to which it accrues from the start of the increase until the start of the