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HMRC internal manual

Employment Income Manual

Termination payments and benefits: non-statutory redundancy payments: general

Many employers make redundancy payments under non-statutory schemes and arrangements. They include:

  • schemes authorised by the Secretary of State for Employment under Section 157 Employment Rights Act 1996. These schemes are a substitute for the statutory payments under the Employment Rights Act 1996 (see EIM13760) and are at least as high as them.
  • general schemes providing payments to employees who are not covered by Employment Rights Act 1996 entitlements (for example, Civil Servants and National Health Service employees)
  • schemes providing payments in addition to statutory payments
  • general schemes not tied to any specific redundancy situation (for example, one expressed in general terms embracing redundancies as they occur)
  • schemes to meet specific redundancy situations (for example, the imminent closure of a particular factory).

EIM13760 explains that statutory redundancy payments fall within Section 401 ITEPA 2003. Payments made as compensation for loss of employment through redundancy from these non- statutory schemes also fall only into Section 401 ITEPA 2003 following the decision in Mairs v Haughey (66TC273), see EIM13750.

Statement of Practice 1/1994:

  • explains HMRC’s practice concerning non-statutory redundancy payments, see EIM13785 and
  • invites employers to submit proposed non-statutory schemes for advance clearance that Section 401 ITEPA 2003 applies to payments from them made as compensation for loss of employment through redundancy, see EIM13790.