The following Employment Tax guidance note Produced by Tolley in association with Sue El Hachmi of Osborne Clarke LLP provides comprehensive and up to date tax information covering:
Termination packages often include both cash and non-cash payments. See the Taxation of cash payments guidance note for information on the taxation of cash payments.
Subject to reliefs and exemptions, non-cash benefits provided on or after termination are taxed under ITEPA 2003, s 401. Any taxable benefits arising before termination are taxed under the benefits code ITEPA 2003, s 63.
It is common for non-cash benefits provided to employees during employment to continue beyond the date of termination. Benefits that straddle the termination are apportioned on a time basis, those falling after termination being taxed under ITEPA 2003, s 401 and those before taxed under ITEPA 2003, s 63.
Non-cash benefits are valued on the cash equivalent of the benefit.
The cash equivalent is the greater of:
the amount that would be chargeable under ITEPA 2003, s 62 if the benefit were earnings. The amount is based on ‘money’s worth’ and will be its direct monetary value or the value it is capable of being turned into ― the second-hand value.
the cash equivalent as defined through the benefits code
ITEPA 2003, s 415(2)
A comparison of the two values can be relevant when assets are transferred to the terminating employee as these will have ‘money’s worth’ under ITEPA 2003, s 62. The rules in the benefits code are set out in ITE
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