EIM13880 - Post-employment notice pay (PENP) formula

Section 402D ITEPA 2003

With effect from 6 April 2018, some termination payments and benefits are chargeable to income tax as general earnings and do not benefit from the £30,000 threshold available in section 403 ITEPA 2003.

EIM13874 defines the term 바카라 사이트˜relevant termination awards바카라 사이트™ and explains that relevant termination awards are split into 2 elements:

  • post-employment notice pay (PENP) (see EIM13876)
  • relevant termination awards subject to section 403 ITEPA 2003 (see EIM13878)

Post-employment notice pay is calculated using the PENP formula, set out in section 402D ITEPA 2003. The PENP formula is:

((BP × D) ÷ P) − T

바카라 사이트˜BP바카라 사이트™ is the employee바카라 사이트™s basic pay in respect of the last pay period of the employment ending before the trigger date (see EIM13882).

바카라 사이트˜D바카라 사이트™ is the number of calendar days in the post-employment notice period (see EIM13890).

바카라 사이트˜P바카라 사이트™ is the number of calendar days in the employee바카라 사이트™s last pay period (see EIM13886).

바카라 사이트˜T바카라 사이트™ is any payment, or benefit received in connection with the termination of a person바카라 사이트™s employment, which is chargeable to income tax apart from in Chapter 3 Part 6 of ITEPA 2003. There are some important exceptions to what is included within the amount of 바카라 사이트˜T바카라 사이트™. (see EIM13896).

If the amount given by the formula is negative then take the amount of post-employment notice pay to be nil.

If the amount given by the formula exceeds the total amount of the relevant termination awards then post-employment notice pay is capped at the total amount of the relevant termination awards.

For a worked example of this formula, see EIM14000.