EIM15415 - Non-approved and employer-financed retirement benefits schemes: example: death by accident

Section 612(1) ICTA 1988 (non-approved schemes) and Section 393B ITEPA 2003 (employer-financed schemes)

An employee died on 1 April 1999 after falling from the roof at home at the weekend. The employer decides to make an ex-gratia payment of £25,000 to the spouse and does so on 1 June 1999. Since the payment is made before 6 April 2006, you consider the non-approved scheme rules (see EIM15010).

The payment is not chargeable under the non-approved retirement benefits scheme legislation. To be chargeable, a payment must be from a retirement benefits scheme (see EIM15020). That means there must be a relevant benefit, and the following is specifically defined as not being relevant benefits for non-approved scheme purposes by Section 612(1) ICTA 1988:

• any benefit that is to be afforded solely by reason of the disablement by accident of a person occurring during his or her service or of his or her death by accident so occurring and for no other reason.

The fact that the accident happened whilst the employee was off duty at home does not matter: the accident is during his or her service if it happens at any time whilst he or she is an employee.

If the payment had been made after 5 April 2006 but otherwise in the same circumstances, you consider the employer-financed scheme rules (see EIM15010).

The payment is not chargeable because only “relevant benefits” from such a scheme are chargeable under Section 394 ITEPA 2003 (see EIM15010 at the 2nd bullet point) and such a payment is not within that definition for employer-financed scheme purposes (see EIM15021).

For payments on death otherwise than by accident, see example EIM15410.