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HMRC internal manual

Employment Income Manual

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Termination payments and benefits: Section 401 ITEPA 2003: exceptions: foreign service: service before 6 April 1974

 

This guidance applies only if you have a case involving foreign service (see EIM13680) and it includes service before 6 April 1974.

The rules were different before 6 April 1974. This may affect the calculation of full exemption (see EIM13690) and will affect the calculation of a reduction (see EIM13700).

In testing whether full exemption is due under EIM13690 this difference is now likely to matter only for the first and last tests of exemption bulleted there (namely, where 3/4 of the whole period of service is needed to be foreign service, or where 1/2 of the whole period including 10 of the last 20 years is needed). So:

  • consider the other test in EIM13690 first. If the last 10 years are foreign service give the exemption without considering the pre-6 April 1974 period. If not
  • assume that all the pre-6 April 1974 service is not foreign service and see whether either of the other two tests in EIM13690 is satisfied. If either of them is met, give the exemption without considering the pre-6 April 1974 period. Otherwise
  • if none of the three tests in EIM13690 are satisfied without considering some of the pre-6 April 1974 period, see SE13710 (last paragraph) to find out whether the service of that period counts as foreign service. Then apply the first (and if necessary the third) bulleted test in EIM13690.

In testing whether reduction of charge is due under EIM13700, any service before 6 April 1974 will affect the calculation. See SE13710 (last paragraph) to find out whether the service of that period counts as foreign service. Then finish the calculation required by EIM13700.