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HMRC internal manual

Employment Income Manual

Termination payments and benefits: meaning of received

Section 403(3) ITEPA 2003

With effect from 6 April 2018, an element of all payments received in connection with the termination of a person’s office, or employment are chargeable to income tax as general earnings. EIM13874 defines the term ‘relevant termination awards’ and explains that relevant termination awards are split into 2 elements:

  • post-employment notice pay (PENP)
  • termination awards subject to section 403 ITEPA 2003

The meaning of receipt for payments, or benefits, that fall within section 401(1)(b) and (c) ITEPA 2003 and ‘termination awards subject to section 403 ITEPA 2003’ is as follows.

Where the payment, or benefit is cash it is received when any of the following takes place:

  • when actual payment of the cash is made (see EIM42270)
  • when a payment on account of the cash is made
  • when the person to receive it can require it to be paid - in a termination this will normally be the date of termination but the parties can agree other arrangements
  • when the person to receive it can require a payment on account of it to be made - so, for example, if a payment within section 401 ITEPA 2003 is to be paid and it can be lawfully demanded, the cash is received at the date when it can be demanded, even if it’s actually paid later

Where the benefit is not cash,  it is received when it’s used or enjoyed. For example, if the benefit provided is the use of a car, it will be enjoyed as soon as the car is available, even if it is actually used only later.