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HMRC internal manual

Employment Income Manual

Termination payments and benefits: handling enquiries: application of Clearances and Approvals 1 (CAP1)

CAP1 is a statement of HMRC’s policy for dealing with enquiries from individuals and can be found on the intranet. CAP1 requires every assistance to be given in finding answers to customers’ enquiries. That assistance can vary from handing out a leaflet to a detailed discussion.

To find out more about when you can rely on advice from HMRC go to Where the enquiry involves a proposed transaction, the answer can usually only be in the form of guidance and that should be made clear, whether the response is in writing or otherwise. But you should be aware that even where guidance is given we would not seek to retrospectively impose any different result provided that an enquirer has acted in good faith and supplied all necessary information. However, if the guidance we give proves technically wrong we would have to put the correct view in operation for any subsequent transaction.

However, for some questions, a formal binding answer should be given (unless the case involves tax planning or avoidance arrangements). This must involve looking at all relevant information about the transaction before giving an answer. Annex 1 in CAP1 explains what the customer needs to provide you with in this respect. The questions are those involving:

the interpretation of legislation passed in the last 4 Finance Acts (until August 2002 this included FA 1998 which introduced changes to the taxation of termination payments and benefits, see SE13040)

Customers may also ask about Statements of Practice (SPs) and Extra-Statutory Concessions (ESCs). For termination payments and benefits this means:

  • SP2/81: contributions made to a pension scheme as part of termination arrangements (see EIM13735). Note: this SP was enacted as section 408 ITEPA 2003 with effect from 6 April 2003 (see EIM13735).
  • SP10/81: the meaning of disability (see EIM13620)
  • SP13/91: voluntary payments on retirement made before 6 April 2006 (see EIM15428)
  • SP1/94: clearance procedure for redundancy schemes (see EIM13785)
  • ESC A10 : lump sums from overseas pension schemes [until replaced by legislation at section 395B ITEPA 5 February 2014] (see EIM15082)
  • ESC A81: legal expenses in termination settlements (see EIM13740).

This does not mean that you must give a binding opinion on a termination case simply because it includes something affected by one of the above, but it does mean that you should give an answer about how the SP or ESC operates in the context of the case. See also EIM12827 (other situations where formal binding advice is given).