The following Tax guidance note Produced in partnership with Lesley Fidler and David Heaton of Baker Tilly for Tolley’s Tax Digest and Sam Whitaker of Shearman & Sterling LLP provides comprehensive and up to date legal information covering:
The first question in respect of any termination payment or benefit is whether it is taxable on basic principles as earnings from or an emolument of an office or employment under section 62 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). This question must be settled before considering any further taxing provisions. For details of the principles to be applied in determining whether a payment made in connection with the termination of an office or employment is taxable as earnings (or emoluments) under ITEPA 2003, s 62, see Practice Note: Termination payments taxed as earnings.
This Practice Note focuses upon the specific deeming provisions (in ITEPA 2003, Part 6, Chapter 3), which subject to income tax payments and benefits on termination of, or change in the duties or functions of, an office or employment that are not otherwise chargeable. These provisions also include a number of exemptions and reliefs as set out below (including an exemption for the first £30,000).
This Practice Note also briefly considers the amendments made to ITEPA 2003, ss 402–404 from 6 April 2018 which effectively make non-contractual payments in lieu of notice (PILONs) fully taxable as earnings and unable to benefit from the £30,000 exemption.
According to the Employment Income Manual at EIM13874, HMRC considers the regime to apply only where the termination of employment itself
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