EIM13030 - Termination payments and benefits: scope of Section 401 ITEPA 2003: benefits
Section 402 ITEPA 2003
What benefits are within Section 401 ITEPA 2003?
EIM13010 explained that Section 401 ITEPA 2003 applies to
certain payments and
benefits.
The definition of benefits for this purpose (Section 402
ITEPA 2003) is complex. The important point is that (apart from
specific exclusions that are listed below) the scope is extremely
wide. So it is unlikely that something provided as part of a
termination or change package falls outside the scope of the
Section. Remember that the definition
includes things in the first two rows of the table
below, meaning that its scope is in fact even wider than set out
there.
If unsure whether something is a benefit for this purpose ask
a series of questions:
Question |
Notes |
| If what is provided was
received for performing duties of the employment, would it be
earnings (see
EIM00515)?
If so, it is a benefit for Section 402 purposes (unless listed below under "exclusions from benefits"). Note: when answering this question, you must ignore any provision that would give a specific exception from earnings (Section 402(1)(b) ITEPA 2003). | Most provisions to
employees in these circumstances would be earnings (see
EIM00515).
But they would not be if they are not money or money's worth (see EIM00520).. In that case, consider the next question. |
| If what is provided was
received for performing duties of the employment, would it be
within the benefits code (see
EIM21006)?
If so, it is a benefit for Section 402 purposes (unless listed below under "exclusions from benefits"). Note: when answering this question, you must ignore any provision that would give a specific exception from the benefits code (Section 402(1)(b) ITEPA 2003). | Provisions in non-cash
form are covered, such as use of a car after termination.
The scope of Section 401 ITEPA 2003 is not limited by the excluded employment provisions of the benefits code (see EIM20007). Section 401 applies to all employees. |
| Even if not within the
two rows above, is what is provided a benefit within the ordinary
meaning of that word?
If so, it is a benefit for Section 402 purposes (unless listed below under "exclusions from benefits"). | Benefit includes provisions in the first two rows of this table, but is not limited to them. |
| Is the provision only a
right to receive something?
If so, it is not a benefit for Section 402 purposes (Section 402(4) ITEPA 2003). | For example, a termination agreement may promise to pay £10,000 12 months after termination. The promise itself is not a benefit for this purpose. Only the payment is. |
Exclusions from benefits |
Nature of exclusion |
| Section 402(2) says that
some things are not benefits even if they would be under the above
definitions. These are listed in the opposite column.
Note: these exclusions apply only for termination benefits. They do not apply where the provision is given for a change of duties or earnings (see EIM13000). | 1. Benefits connected
with a car, van or heavy goods vehicle. This exclusion ensures that
where the use of such vehicles is a benefit for the purposes of
Section 401 ITEPA 2003, there is a limitation on any further charge
for things provided in connection with the vehicle. This limitation
corresponds to the position during employment (see
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)for cars. There are equivalent
provisions for vans and heavy goods vehicles).
2. Non-cash vouchers or credit tokens to obtain goods or services (or money to spend on goods or services) in connection with a car, van or heavy goods vehicle. This corresponds with similar provisions during employment (see EIM16100 for cars. There are equivalent provisions for vans and heavy goods vehicles). 3. Mobile telephones (as for employees, see EIM21780). 4. Computer equipment up to £500 per year (as for employees, see EIM21697). |
| Section 402(3) excludes one benefit from the definition where it is received in connection with a change of duties or earnings (see EIM13000) | Removal benefits and expenses (as for employees, see EIM03101) |
For a non-cash provision used or enjoyed before 6 April 1998,
different rules apply (see SE13250).
See
EIM13250 for the treatment of non-cash
provisions.
