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HMRC internal manual

Employment Income Manual

Termination payments and benefits: redundancy: site agreements for short-service employees

In some industries employment is often short-term. A payment made at the end of such an employment may be within Section 62 ITEPA 2003 rather than Section 401 ITEPA 2003.

Examples are industries concerned with the construction of oil rigs and the erection of plant in oil refineries. An employment may last only until a particular construction task has been completed.

Employees in these circumstances will rarely qualify for statutory redundancy payments (an employee must serve two years to qualify, for example). Consequently, employers and trade unions frequently enter into agreements providing for specified payments to be made when such an employment ends. Often, several employers at one location or site join together as parties to such an agreement, which is then known as a site agreement.

Each site agreement is different but the types of payment most frequently provided and their tax treatment are shown in the table at EIM13830. For the tax treatment of certain severance payments made under the working rule agreement for the engineering construction industry, see EIM13834.