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HMRC internal manual

Employment Income Manual

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

The following table shows the types of payment most frequently made under site agreements (see EIM13825) and the appropriate tax treatment. See EIM13832 for the report to be made in certain cases.

| Type of payment | Tax treatment | | ————————————————————————————————————————————————————————————————————————— | ————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— | | Completion bonus or time-saved payment: this is a sum paid for completing a contract before a specified date.
Payment for completing a project on time.
Retention payment: this is based on the number of hours worked. | Section 62 ITEPA 2003 (see EIM00515).
The sum is a reward for services in the form of a contractually guaranteed terminal payment (see EIM13765). | | Severance payment (excluding a statutory redundancy payment).
Usually related to length of service and paid where an employment lasts less than 2 years. | May satisfy the definition of payments for redundancy (see EIM13800) and so fall within section 401 ITEPA 2003 (see EIM13775).
Otherwise, section 62 ITEPA 2003 (see EIM00515). | | Payment in lieu of notice (PILON) | See EIM12975 and EIM13874 | | Statutory redundancy payment made under Employment Rights Act 1996 or Northern Ireland equivalent (see EIM13760) | Section 401 ITEPA 2003 (see EIM13760) |