ACCA Advanced Taxation (ATX) Practice Exam

When is a golden hello payment not taxable?

1. When paid as a bonus

2. When it compensates for losses from previous jobs

3. When it is under a certain amount

4. When paid to non-residents

The correct answer is: When it compensates for losses from previous jobs

A golden hello payment is typically a financial incentive provided by an employer to attract a new employee, particularly one with valuable skills or experience. In determining when such payments might not be taxable, the concept of compensation for losses from previous jobs is crucial. When a golden hello payment is specifically designed to compensate for losses incurred from previous employment—such as forfeited bonuses or benefits—it is often treated as a form of compensation rather than a straightforward payment for services rendered in the new role. This special treatment reflects the understanding that the employee is being compensated for an economic disadvantage rather than receiving a windfall from their new employer. Thus, such payments may fall outside of regular taxation rules that apply to standard income or bonuses. This context clarifies why this particular situation can exempt the payment from taxation, highlighting the nuances of tax law concerning employment incentives.