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Holiday pay

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The question of how payments of holiday pay should be taxed is a long-standing area of uncertainty for employers and payroll software providers.

The intention is:

 When holiday pay is paid  How holiday pay should be taxed
 Paid as a lump sum

 Should be taxed as an extra pay

 Included in regular salary or wages, or paid in substitution for regular salary or wages when leave is taken  Should be taxed as salary or wages


This intention could be clarified either in legislation or in an  Inland Revenue publication.

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