Supporting Guidance: employer compliance: guidance by subject: compliance revenue recording: pre and post transaction advice - termination payments
An employer or any other person operating a redundancy scheme may request both pre and post transaction advice to satisfy themselves that the scheme will be accepted by HMRC as liable to tax only under Section 40 ITEPA 2003.
These cases should be considered by
- the Employment Status & Intermediaries (ES&I) teams in LC
- the Tax Specialist assigned to the business in LB
- the specialist PT International where the employees who will be affected are inbound expatriates only.
Clearance requests must be made in writing and should include
- the scheme document
- the text of any intended letter to employees explaining the terms relating to the payments.
Where a ruling is given which involves detailed examination of the circumstances, and written guidance on correct treatment, you should
- register the case in Caseflow as Compliance Check - Broader Coverage using the correct inaccuracy category
- calculate and pursue any underpayment of tax, NIC and interest due as a result of the ruling
- consider behaviours and penalties, see COG914070
- recover the amounts due by a Class 6 contract settlement and / or current year adjustment as appropriate
- record the amount of additional compliance revenue on Caseflow.
Note: Future Revenue Benefit is not appropriate in these cases.
The compliance revenue scored must be supported by a detailed auditable calculation.
compliance revenue arising as a result of a compliance check should be made under the appropriate recovery code on Caseflow.
Where it is found that elements of the termination package have been or are intended to be charged incorrectly for tax and NIC purposes, for example contractual entitlements chargeable within Section 62 ITEPA 2003 treated as damages / compensation chargeable within Section 401.
You should score tax and NIC liability for closed or current year as appropriate.