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HMRC internal manual

Employment Income Manual

Termination payments and benefits: example: Section 401 ITEPA 2003: legal obligation

Section 401 ITEPA 2003An employee with 9 months’ service is made redundant. Because the employee has worked less than 2 years with the company, there is no right to receive a redundancy payment under the Employment Rights Act 1996 (see


But, as a gesture of goodwill, the employer decides to pay £1,000 to the employee on account of the redundancy.

The £1,000 falls within Section 401 ITEPA 2003 because the Section applies whether or not the payment is made under a legal obligation.