PAYE74025 - PAYE operation: lump sum termination payments: repayment claim following termination payment

This subject applies where claims are made in the tax year the lump sum termination payment is made.

For claims made in later years a review of the liability should be made in the normal way.

An individual might complain that too much tax was deducted from a termination payment made in the current tax year. For instance, if PAYE was operated in the normal way at the time of the payment, tax may have been deducted at rates higher than the overall rate for the year. This happens particularly when payment is made early in the tax year.

Where a repayment claim is made, ask the individual for the following

  • Parts 2 and 3 of form P45, if held

For cases where the termination payment is not included in the P45 figures

  • For sight of the documentary evidence the customer has received from their former employer in which details of the termination payment are shown. Details in the document should include
    • The date of the payment(s)
    • The gross amount of the payment(s)
    • The amount of PAYE tax deducted from each payment
    • Confirmation that it is a post leaving payment
Note: If the customer does not hold any documentary evidence of the payment, advise them to obtain such evidence from their former employer as the claim cannot be processed without it.
  • The rate of occupational pension, if received
  • Details, including rate of pay, of any current employment
  • If not currently employed, is he or she
    • Finally retired and not seeking further employment
Or
    • Not seeking or taking up employment until after the forthcoming 5 April
Or
    • Seeking full time employment
Or
    • Seeking part time employment (if so what is the anticipated rate of pay?)
Or
    • Is now in receipt of Job Seekers Allowance (JSA) or Employment Support Allowance (ESA)
Or
    • Started in business on own account or intending to do so. Where the customer has started in business, to allow you proceed with their claim you should ask them for an estimate of the income / profit they will receive in the year to which the termination payment refers

When this information has been obtained and the customer

  • Is now claiming JSA / ESA (including cases with an SA live link), follow the guidance at PAYE94055 
  • Has finally ceased employment, they are not claiming JSA / ESA, they are not now self employed and they do not have a continuing PAYE source, make a cessation repayment in accordance with the guidance at PAYE94025 
  • Is not claiming JSA / ESA, they are now self employed or they have a continuing PAYE source (for example they have taken up further employment or they receive an occupational pension), follow the guidance at PAYE74026 
  • Has ceased employment, they are not claiming JSA / ESA, they are not now self employed but they are looking for further employment, follow the guidance at PAYE74026 
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