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HMRC internal manual

Employment Income Manual

Termination payments and benefits: example: Section 401 ITEPA 2003: payment or benefit received by someone other than the employee

Section 401(1) ITEPA 2003

Example 1An employee suffering severe psychological problems is dismissed from employment. Following Court action by relatives, the ex-employer is ordered to pay £25,000 compensation for unfair dismissal to the employee’s spouse.

Although the ex-employee never receives the £25,000, it is within the scope of Section 401 ITEPA 2003 because the spouse of the employee receives it. The same would apply if the employee’s blood relative, dependent or personal representatives received it (see EIM13020).
### Example 2As part of a settlement on termination of employment, an employer agrees to pay £10,000 to the employee’s golf club, securing lifetime membership and other benefits.

The golf club is not within the class of recipients covered by Section 401 ITEPA 2003 (see EIM13020), the payment is not received by the spouse or any blood relative or dependant of the employee nor the employee’s personal representatives.

See EIM13918 for the reason that the £10,000 is nevertheless within Section 401 ITEPA 2003.