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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Termination payments and benefits: Section 401 ITEPA 2003: exceptions: payments on account of injury or disability: interaction with capital gains tax

Section 406(b) ITEPA 2003

A taxpayer who claims exception on disability grounds in respect of a terminationpayment within Section 401 ITEPA 2003 may claim ill-health retirement relief for capitalgains tax purposes until 2002/03.

This could happen, for example, if an individual who is a full time working officer oremployee of his or her personal company retires early on ill-health grounds and at thesame time sells shares in the company.

The capital gains tax claim is referred to the HMRC’s Medical Adviser (see CG63400+). Ifthe taxpayer’s claim to that relief is accepted you may also accept that the paymentqualifies for exception from a Section 401 ITEPA 2003 charge under EIM13610.