Termination payments

STOP PRESS: Abolition of non-dom regime and introduction of residence-based IHT regime Finance Act 2025 (FA 2025) which received Royal Assent on 20 March 2025, implements legislation to abolish the remittance basis of taxation and replace it with a residence-based regime, commencing on 6 April 2025. FA 2025 also replaces domicile as the key factor in establishing liability to inheritance tax. Other changes include amendment of the rules determining excluded property status, the abolition of protected settlements status of offshore trusts, and changes to overseas workday relief.

For information on these changes, see: Practice Notes: The abolition of the remittance basis of taxation from 2025–26, A new residence-based regime for IHT from 2025–26. See also: Finance Act 2025.

The Practice Notes in this subtopic consider the tax treatment of payments (and the provision of other benefits) made in connection with the termination of employment. Tax treatment in this context means the income tax and National Insurance contributions (NICs) treatment for the employee or director, as well as the PAYE and NICs obligations for the employing company and the corporation

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

TAKE A FREE TRIAL

Latest Tax News

Tax weekly highlights—1 May 2025

This week's edition of Tax weekly highlights includes: (1) coverage of the numerous ‘Tax update spring 2025’ announcements and publications, (2) an update from the CIOT on the LLP salaried member rules and (3) News Analyses on the Upper Tribunal’s (UT) decision on an SDLT overpayment relief claim (L-L-O Contracting Ltd) and on the First-tier Tax Tribunal’s (FTT) decisions on (i) the remedy available under FA 2003, Sch 10, para 34 when no other SDLT relief is available (Candy), (ii) the effect of liquidation on a director loan (Quillan) and (iii) a legislative drafting error in respect of the temporary reduced rate of VAT (JD Wetherspoon).

Tax update spring 2025—Tax analysis

Tax analysis: On 28 April 2025, the government announced a package of technical tax policy proposals aimed at simplifying and reforming the tax system and improving tax administration. These announcements included the publication of draft legislation, new consultations, various technical papers and responses to consultations, as well as updates on previously announced measures together with new initiatives.

Upper Tribunal denies SDLT overpayment relief in failed late MDR claim (L-L-O Contracting Ltd and others v HMRC)

Tax analysis: In L-L-O Contracting Ltd and others v HMRC, the Upper Tribunal (UT) dismissed the companies’ appeals against the First-tier Tax Tribunal’s (FTT) decision to dismiss appeals against HMRC’s decision not to allow claims to SDLT overpayment relief. The companies had not claimed multiple dwellings relief (MDR) in their SDLT returns and, having missed the time limit for making the claims, sought to obtain the relief by way of overpayment relief claims under paragraph 34 of Schedule 10 of the Finance Act 2003 (FA 2003).

FTT concludes cider supplies did not benefit from temporary reduced VAT rate (JD Wetherspoon PLC v HMRC)

Tax analysis: In JD Wetherspoon PLC v HMRC, the FTT decided that for the purposes of the temporary reduced VAT rate for hospitality and tourism, cider should be classified as an ‘alcoholic beverage’ and thus excluded from the reduced rate. The issue arose because a drafting error in the relevant legislation meant that cider was not included in the definition of an alcoholic beverage, however, the FTT applied the Inco principle to correct obvious drafting errors, and the taxpayer claim was therefore dismissed.