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HMRC internal manual

Employment Income Manual

Termination payments and benefits: example: section 401 ITEPA 2003: payment or benefit received after termination

Section 401 ITEPA 2003

An employee believes that dismissal from employment is wrongful, and takes legal action in the Courts to secure compensation. Proceedings drag on for 4 years, when the ex-employer agrees to pay £20,000 in settlement of the claim. The employee was dismissed on 3 November 2011.

The delay is irrelevant as far as the question of whether the payment is within the scope of section 401 ITEPA 2003 is concerned.

The £20,000 is still in connection with the termination and so falls within the section.

Note: see EIM13100 for the tax year for which a payment or benefit is assessed.