EIM13620 - Termination payments and benefits: Section 401 ITEPA 2003: exceptions: payments on account of injury or disability: meaning of disability: Statement of Practice 10/1981
Statement of Practice 10/1981
EIM13610 explained that there is an
exception from the charge under Section 401 ITEPA 2003 for a
payment or benefit made on account of disability. The practice
regarding the meaning of disability is set out in Statement of
Practice 10/1981, as follows.
Disability means an incapacity to fulfil the duties of an
office or employment caused either;
- by a sudden affliction (such as a heart attack), or
-
- by the culmination of a process of deterioration of physical or mental health caused by a chronic illness (such as bronchitis)
but not by the normal processes of ageing.
If, for example, an employee has suffered a heart attack and
returns to work, any payment made on termination of employment at a
later date may not be due to the disability. Only the reason for
the payment is relevant.
How this exception operates was considered in Hasted v Horner
(67TC439), see
EIM13630.
