EIM13700 - Termination payments and benefits: section 401 ITEPA 2003: foreign service: reduction of charge

Section 414 ITEPA 2003

EIM13690 explained that if an employee whose service includes 바카라 사이트榝oreign service바카라 사이트� fails to satisfy the conditions for full exception, the employee might still qualify for a reduction in the charge to income tax for payments and other benefits that fall within section 401 ITEPA 2003.

Eligibility for reduction

With effect from 6 April 2018, the same restrictions apply to the availability of this reduction as apply to the full exception for 바카라 사이트渇oreign service바카라 사이트� (see EIM13680). A reduction of the charge to income tax is no longer available for payments or other benefits that fall within section 401(1)(a) ITEPA 2003, where all of the following criteria are met:

  • the employee, or former employee is UK resident for the tax year in which the employment terminates (see EIM42800)
  • the employment is terminated on or after 6 April 2018
  • the payment or other benefit is received after 13 September 2017

However, the legislation, which removes the reduction in the circumstances above does not apply if the service of the employee or former employee includes 바카라 사이트榝oreign seafaring service바카라 사이트� (see EIM33101). So, on, or after 6 April 2018, a reduction in the charge to income tax remains available for payments, or benefits received in connection with the termination of a person바카라 사이트檚 employment if that employment included 바카라 사이트榝oreign seafaring service바카라 사이트�. EIM13685 includes the definition of 바카라 사이트榝oreign seafaring service바카라 사이트�.

If service before 6 April 1974 is involved, see EIM13705.

EIM13702 explains how the reduction applies where the employee or former employee is eligible for the reduction and their employment included 바카라 사이트榝oreign seafaring service바카라 사이트�.

Calculation of reduction

Where an employee or former employee is eligible for the reduction and their employment included 바카라 사이트榝oreign service바카라 사이트� follow the rules below.

The reduction for 바카라 사이트榝oreign service바카라 사이트� applies to both the element of any termination payment that is post-employment notice pay (PENP) (see EIM13874) and the element which is subject to section 403 ITEPA 2003 (see EIM13872).

However, the reduction of each element must be calculated separately (see the examples at EIM13985).

The amount of the reduction in PENP is the amount of PENP multiplied by the length of 바카라 사이트榝oreign service바카라 사이트� and divided by the length of total service before the relevant date (the meaning of relevant date is the same as in EIM13680).

EIM13877 explains the chargeability of post-employment notice pay for non-UK resident employees.

For the element which is subject to section 403 ITEPA 2003, the 拢30,000 threshold must be deducted before calculating the reduction (see example EIM13980). The excess over the threshold is called the 바카라 사이트榓mount charged to tax바카라 사이트� (in section 414(2) ITEPA 2003 it is called the amount that would otherwise count as employment income).

The amount of the reduction is the 바카라 사이트榓mount charged to tax바카라 사이트� multiplied by the length of 바카라 사이트榝oreign service바카라 사이트� and divided by the length of total service before the relevant date. The result can be deducted from the 바카라 사이트榓mount charged to tax바카라 사이트� if the qualifying conditions are met.

Note

The taxpayer can claim the foreign service reduction by notice in writing at any time up to 4 years from the end of the year of assessment to which the claim relates (for claims made before 2 April 2010 the limit is 5 years after 31 January following the end of the relevant year of assessment).