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HMRC internal manual

Employment Income Manual

Termination payments and benefits: Section 401 ITEPA 2003: exemptions, etc: additional lump sum compensation payment

In 1987 the rules for redundancy payments for civil servants were changed. As a result, some civil servants then under age 40 acquired reserved rights. Those rights were designed to make sure that the new rules did not disadvantage them if they were later made redundant when aged under 50.

This is achieved by giving them an additional lump sum compensation payment (often termed an ALSCP). Part of this ALSCP compensates for the loss of items that would have been exempt from tax as benefits from a statutory retirements benefit scheme (the Principal Civil Service Pension Scheme). So that part is also treated as exempt.

The same exemption is available to employees transferred out of the civil service who retain those rights.

The calculation of the exemption is complex. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Note: this exemption is given in addition to the £30,000 threshold (see EIM13505).