Termination payments

STOP PRESS: Abolition of non-dom regime and remittance basis of taxation from 2025–26: Finance Act 2025 abolished the remittance basis of taxation and replaced it with a residence-based regime from 6 April 2025. The changes include the introduction of a new Foreign Income and Gains (FIG) regime, and amendments to overseas workday relief. For information on these changes, see Practice Note: The abolition of the remittance basis of taxation from 2025–26.

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 tax deductibility of the particular payment.

Depending on the circumstances, termination payments (or benefits) may be taxable in full, in part, or in limited circumstances may be fully exempt.

The first question is whether a payment made (or other benefit provided) on or in connection with termination of an employment

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

FTT decides sponsorship payments taxable on cricketer despite purported assignment to his company (Collingwood v HMRC)

Tax analysis: In Collingwood, the First-tier Tax Tribunal (FTT) dismissed the taxpayer's appeal against closure notices amending his tax returns, holding that the taxpayer (a former professional cricketer) was personally liable to income tax on sponsorship payments received under various agreements, notwithstanding the purported assignment of his publicity rights to his company.

Supreme Court rules VAT chargeable on success fees paid after VAT grouping severed (The Prudential Assurance Company Ltd v HMRC)

The Supreme Court has unanimously dismissed the appeal of Prudential Assurance Company Ltd (Prudential), ruling that VAT was correctly charged on success fees paid to a company called Silverfleet Capital Limited (Silverfleet) after it left Prudential's VAT group, even though the underlying services were performed while both companies were group members. The judgment clarifies that Article 64 of Directive 2006/112/EC (the Principal VAT Directive (PVD)), applies to contingent 'successive payments' like success fees, with the chargeable event occurring when payment crystallises rather than when services are performed. As well as summarising the decision, this News Analysis contains commentary from Flossie Skinner, Tax Assistant, at Joseph Hage Aaronson & Bremen LLP on the implications of the judgment.

Tax weekly highlights—11 September 2025

This week's edition of Tax weekly highlights includes: (1) the UK Supreme Court’s decision in Prudential Assurance Company upholding the decision that the success fees were subject to VAT, and (2) the High Court in Hotelbeds allowing the taxpayer’s judicial review claim.

Chancellor warned against cutting pension tax relief

Law360: Possible changes to pension tax relief rules that could be announced in the forthcoming autumn budget 2025 to raise additional revenue are fraught with risks for Chancellor Rachel Reeves and could break government manifesto commitments, Lane Clark & Peacock LLP (LCP) has said.