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HMRC internal manual

Employment Income Manual

Employment income: earnings from employment: customary payments in respect of services

Section 62 ITEPA 2003

Even if a lump sum payment is not made under a legal obligation, it is taxable as earnings within Section 62 ITEPA 2003 if it is customary within a particular employment for such payments to be made to a particular class of employee.

The case of Corbett v Duff (23TC763)(see example EIM00645) illustrates this principle.

This principle will not usually apply where a director of a family company retires and receives a lump sum. Such payments need to be considered under EIM02100 and EIM13000 onwards, see also EIM15000 onwards.