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(3) In this Chapter “benefit” does not include a benefit received in connection with | |
any change in the duties of, or earnings from, a person’s employment to the | |
extent that it is a benefit which, were it received for performance of the duties | |
of the employment, would fall within 271(1) (limited exemption of removal | |
benefits and expenses). | 5 |
(4) The right to receive a payment or benefit is not itself a benefit for the purposes | |
of this Chapter. | |
Payments and benefits treated as employment income | |
403 Charge on payment or other benefit | |
(1) The amount of a payment or benefit to which this Chapter applies counts as | 10 |
employment income of the employee or former employee for the relevant tax | |
year if and to the extent that it exceeds the £30,000 threshold. | |
(2) In this section “the relevant tax year” means the tax year in which the payment | |
or other benefit is received. | |
(3) For the purposes of this Chapter— | 15 |
(a) a cash benefit is treated as received— | |
(i) when it is paid or a payment is made on account of it, or | |
(ii) when the recipient becomes entitled to require payment of or on | |
account of it, and | |
(b) a non-cash benefit is treated as received when it is used or enjoyed. | 20 |
(4) For the purposes of this Chapter the amount of a payment or benefit in respect | |
of an employee or former employee exceeds the £30,000 threshold if and to the | |
extent that when it is aggregated with other such payments or benefits to | |
which this Chapter applies it exceeds £30,000 according to the rules in section | |
404 (how the £30,000 threshold applies). | 25 |
(5) If it is received after the death of the employee or former employee— | |
(a) the amount of a payment or benefit to which this Chapter applies | |
counts as the employment income of the personal representatives for | |
the relevant year if or to the extent that it exceeds £30,000 according to | |
the rules in section 404, and | 30 |
(b) the tax is accordingly to be assessed and charged on them and is a debt | |
due from and payable out of the estate. | |
(6) In this Chapter references to the taxable person are to the person in relation to | |
whom subsection (1) or (5) provides for an amount to count as employment | |
income. | 35 |
404 How the £30,000 threshold applies | |
(1) For the purpose of the £30,000 threshold in section 403(4) and (5), the payments | |
and other benefits provided in respect of an employee or former employee | |
which are to be aggregated are those provided— | |
(a) in respect of the same employment, | 40 |
(b) in respect of different employments with the same employer, and | |
(c) in respect of employments with employers who are associated. | |
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(2) For this purpose employers are “associated” if on a termination or change | |
date— | |
(a) one of them is under the control of the other, or | |
(b) one of them is under the control of a third person who on that | |
termination or change date or another such date controls or is under the | 5 |
control of the other. | |
(3) In subsection (2)— | |
(a) references to an employer, or to a person controlling or controlled by an | |
employer, include the successors of the employer or person, and | |
(b) “termination or change date” means a date on which a termination or | 10 |
change occurs in connection with which a payment or other benefit to | |
which this Chapter applies is received in respect of the employee or | |
former employee. | |
(4) If payments and other benefits are received in different tax years, the £30,000 is | |
set against the amount of payments and other benefits received in earlier years | 15 |
before those received in later years. | |
(5) If more than one payment or other benefit is received in a tax year in which the | |
threshold is exceeded— | |
(a) the £30,000 (or the balance of it) is set against the amounts of cash | |
benefits as they are received, and | 20 |
(b) any balance at the end of the year is set against the aggregate amount | |
of non-cash benefits received in the year. | |
Exceptions and reductions | |
405 Exception for certain payments exempted when received as earnings | |
(1) This Chapter does not apply to any payment received in connection with the | 25 |
termination of a person’s employment which, were it received for the | |
performance of the duties of the employment, would fall within section 308 | |
(exemption of contributions to approved personal pension arrangements). | |
(2) This Chapter does not apply to any payment received in connection with any | |
change in the duties of, or earnings from, a person’s employment to the extent | 30 |
that, were it received for the performance of the duties of the employment, it | |
would fall within 271(1) (limited exemption of removal benefits and expenses). | |
406 Exception for death or disability payments and benefits | |
This Chapter does not apply to a payment or other benefit provided— | |
(a) in connection with the termination of employment by the death of an | 35 |
employee, or | |
(b) on account of injury to or disability of an employee. | |
407 Exception for payments and benefits under tax-exempt pension schemes | |
(1) This Chapter does not apply to a payment or other benefit provided under a | |
tax-exempt pension scheme if— | 40 |
(a) the payment or other benefit is by way of compensation— | |
(i) for loss of employment, or | |
(ii) for loss or diminution of earnings, and | |
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the loss or diminution is due to ill-health, or | |
(b) the payment or other benefit is properly regarded as earned by past | |
service. | |
(2) For this purpose “tax-exempt pension scheme” means— | |
(a) a retirement benefits scheme which is— | 5 |
(i) an approved scheme, | |
(ii) a relevant statutory scheme, or | |
(iii) a scheme set up by a government outside the United Kingdom | |
for the benefit of its employees or primarily for their benefit, or | |
(b) any such scheme or fund as was described in section 221(1) and (2) of | 10 |
ICTA 1970 (schemes to which payments could be made without charge | |
to tax under section 220 of ICTA 1970). | |
(3) In this section— | |
“approved scheme” has the meaning given by section 612(1) of ICTA, | |
“relevant statutory scheme” has the meaning given by section 611A of | 15 |
ICTA, and | |
“retirement benefits scheme” has the meaning given by section 611 of | |
ICTA. | |
408 Exception for contributions to tax-exempt pension schemes | |
(1) This Chapter does not apply to a contribution to a tax-exempt pension scheme | 20 |
or approved personal pension arrangements if the contribution is made— | |
(a) as part of an arrangement relating to the termination of a person’s | |
employment, and | |
(b) in order to provide benefits for the person in accordance with the terms | |
of the scheme or approved personal pension arrangements. | 25 |
(2) For this purpose— | |
“tax-exempt pension scheme” has the same meaning as in section 407(2), | |
and | |
“approved” and “personal pension arrangements” have the meaning | |
given by section 630(1) of ICTA. | 30 |
409 Exception for payments and benefits in respect of employee liabilities and | |
indemnity insurance | |
(1) This Chapter does not apply to a payment or other benefit received by an | |
individual if or to the extent that— | |
(a) in the case of a cash benefit, it is provided for meeting the cost of a | 35 |
deductible amount , or | |
(b) in the case of a non-cash benefit, it is or represents a benefit equivalent | |
to the cost of paying a deductible amount. | |
(2) For the purposes of this section “deductible amount” means an amount which | |
meets conditions A to C. | 40 |
(3) Condition A is that the amount is paid by the individual. | |
(4) Condition B is that a deduction for the amount would have been allowed under | |
section 346 from earnings from the relevant employment, if the individual still | |
held the employment when the amount was paid. | |
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(5) Condition C is that the amount is paid at a time which falls within the run-off | |
period. | |
(6) In this section and section 410— | |
“relevant employment” means the employment mentioned in section | |
401(1); | 5 |
“run-off period” means the period which— | |
(a) starts with the day on which the relevant employment | |
terminated, and | |
(b) ends with the last day of the sixth tax year following the tax year | |
in which the period started. | 10 |
410 Exception for payments and benefits in respect of employee liabilities and | |
indemnity insurance: individual deceased | |
(1) This Chapter does not apply to a payment or other benefit received by an | |
individual’s personal representatives if or to the extent that— | |
(a) in the case of a cash benefit, it is provided for meeting the cost of a | 15 |
deductible amount, or | |
(b) in the case of a non-cash benefit, it is or represents a benefit equivalent | |
to the cost of paying a deductible amount. | |
(2) For the purposes of this section “deductible amount” means an amount which | |
meets conditions A to C. | 20 |
(3) Condition A is that the amount is paid by the individual’s personal | |
representatives. | |
(4) Condition B is that a deduction for the amount would have been allowed under | |
section 346 from earnings from the relevant employment, if— | |
(a) the individual had not died, | 25 |
(b) the amount had been paid by the individual, and | |
(c) the individual still held the employment when the amount was paid. | |
(5) Condition C is that the amount is paid at a time which falls within the run-off | |
period. | |
411 Exception for payments and benefits for forces | 30 |
This Chapter does not apply to a payment or other benefit provided— | |
(a) under a Royal Warrant, Queen’s Order or Order in Council relating to | |
members of Her Majesty’s forces, or | |
(b) by way of payment in commutation of annual or other periodical | |
payments authorised by any such Warrant or Order. | 35 |
412 Exception for payments and benefits provided by foreign governments etc. | |
(1) This Chapter does not apply to— | |
(a) a benefit provided under a pension scheme administered by the | |
government of an overseas territory within the Commonwealth, or | |
(b) a payment of compensation for loss of career, interruption of service or | 40 |
disturbance made— | |
(i) in connection with any change in the constitution of any such | |
overseas territory, and | |
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(ii) to a person who was employed in the public service of the | |
territory before the change. | |
(2) References in subsection (1) to— | |
(a) an overseas territory, | |
(b) the government of such a territory, and | 5 |
(c) employment in the public service of such a territory, | |
have the meanings given in section 615 of ICTA. | |
413 Exception in certain cases of foreign service | |
(1) This Chapter does not apply if the service of the employee or former employee | |
in the employment in respect of which the payment or other benefit is received | 10 |
included foreign service comprising— | |
(a) three-quarters or more of the whole period of service ending with the | |
date of the termination or change in question, or | |
(b) if the period of service ending with that date exceeded 10 years, the | |
whole of the last 10 years, or | 15 |
(c) if the period of service ending with that date exceeded 20 years, one- | |
half or more of that period, including any 10 of the last 20 years. | |
(2) In subsection (1) “foreign service” means service to which subsection (3), (4) or | |
(6) applies. | |
(3) This subsection applies to service in or after the tax year 2003-04 such that— | 20 |
(a) the earnings from the employment were not general earnings to which | |
section 15 or 21 applies (earnings for year when employee resident and | |
ordinarily resident in UK), or would not have been had there been any, | |
or | |
(b) a deduction equal to the whole amount of the earnings from the | 25 |
employment was or would have been allowable under Chapter 6 of | |
Part 5 (deductions from seafarers’ earnings). | |
(4) This subsection applies to service before the tax year 2003-04 and after the tax | |
year 1973-74 such that— | |
(a) the emoluments from the employment were not chargeable under Case | 30 |
I of Schedule E, or would not have been so chargeable had there been | |
any, or | |
(b) a deduction equal to the whole amount of the emoluments from the | |
employment was or would have been allowable under a foreign | |
earnings deduction provision. | 35 |
(5) In subsection (4) “foreign earnings deduction provision” means— | |
(a) paragraph 1 of Schedule 2 to FA 1974, | |
(b) paragraph 1 of Schedule 7 to FA 1977, or | |
(c) section 192A or 193(1) of ICTA. | |
(6) This subsection applies to service before the tax year 1974-75 such that tax was | 40 |
not chargeable in respect of the emoluments of the employment— | |
(a) in the tax year 1956-57 or later, under Case I of Schedule E, or | |
(b) in earlier tax years, under Schedule E, | |
or it would not have been so chargeable had there been any such emoluments. | |
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