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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Employment income: retirement lump sums: Section 637 ITEPA 2003

Section 637 ITEPA 2003

Certain retirement lump sums are not chargeable as employment income (see EIM00510). These are lump sums paid out of schemes:

  • within Section 387(2) ITEPA 2003 (see EIM15030), or
  • which are approved personal pension arrangements (see EIM01570) or retirement annuity contracts.

However this exemption does not apply if the payment is compensation for:

  • loss of office or employment (see EIM12852), or
  • loss of or diminution of earnings unless the payment is regarded as earned by past services or due to ill-health.

If the payment is not authorised by the rules of an approved scheme Section 583 ITEPA 2003 may tax it. Advise IR SPSS (Nottingham) before assessing such a payment.

The treatment of lump sums from non-approved schemes is dealt with at EIM15000 and termination payments generally at EIM13660.