BN49 - Tax Treatment Of Payments Under Armed Forces Redundancy Scheme 2006

Who is likely to be affected?

1. Recipients of payments under the Armed Forces Redundancy Scheme 2006.

General description of the measure

2. Legislation is being introduced in Finance Bill 2007 to ensure that payments under the 2006 scheme will be tax-free in the same way as payments under the 1975 Armed Forces Redundancy Scheme.

Operative date

3. The legislation will apply to any payments under the 2006 scheme from its commencement on 6 April 2006.

Current law and proposed revisions

4. Current legislation provides tax-exemption for payments made under the Armed Forces Redundancy Scheme 1975.

5. An amendment to the Income Tax (Earnings and Pensions) Act 2003 is needed to replicate the tax-exemption applicable to payments under the 1975 scheme in relation to payments under the 2006 scheme.

Further advice

6. If you have any questions about this change, please contact the Employer Helpline on 0845 7143 143.