SE12810 - Termination payments and benefits: introduction: applying the legislation

Sections 19, 313, 596A and 148 ICTA 1988

Having found what each element of a termination package is for, each element should then be looked at separately.

Note that there is a self-contained set of statutory rules to deal with non-approved retirement benefits schemes. Guidance on this is at SE15010 onwards. If those rules apply, you need not consider the Sections below.

• First, consider Section 19 ICTA 1988: is the payment or benefit an emolument from the employment? See SE12850 for the more common termination payments that are within Section 19. Material on Section 19 generally is at SE00620 and subsequent instructions, particularly SE00530 regarding non-money receipts. If not,
• Second, consider Section 313 ICTA 1988: is the payment or benefit for a restrictive covenant? See SE03600 onwards. If not,
• Last, consider Section 148 ICTA 1988: is the payment or benefit made in connection with termination? See SE12850 onwards. Note: it is common for benefits (such as use of a car or medical insurance) to continue through the termination of the employment. See SE12815 for details of how these are taxed for the year of termination.

There is a typical example of this process at SE13900.

Note that:

• redundancy payments (as defined in SE13800) will always be within Section 148 ICTA 1988 ( SE13000 onwards)

• a lump sum from an approved retirement benefits scheme is exempt from tax. Pensions Schemes Office can advise concerning such schemes.