SE15024 - Non-approved "retirement benefits schemes": ill-health and “retirement”

Termination of employment can occur because of ill health. In such circumstances, the employee may be obliged to give up work completely and this can be described as a “retirement”. However, if a payment is made purely as consolation for loss of health that results in premature termination of employment, it is not regarded as made in connection with “retirement”. The payment should be treated as compensating for the employee's loss of health which resulted in the termination and not as a retirement benefit.

Such a payment will chargeable only under Section 148 ICTA 1988 subject to any claim to the disability exemption (see SE13610).

Note: a payment made on retirement from an office or employment because of disablement by accident is not chargeable under Section 596A ICTA 1988. This is because such a payment is not a “relevant benefit” (as defined in SE15020).