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HMRC internal manual

Employment Income Manual

Employment income: commutation payments

Section 62 ITEPA 2003

A commutation payment is a lump sum payment made to replace a periodical payment such as a salary or pension. A sum paid in lieu of a salary, wage or other form of remuneration is normally taxable as earnings within Section 62 ITEPA 2003 (see EIM00670). If, exceptionally, such a payment is not taxable as earnings from the employment it may still be taxable as specific employment income within Section 401 ITEPA 2003 (see EIM13000).