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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Termination payments and benefits: example: Section 401 ITEPA 2003: exceptions: foreign service: groups

Sections 413 to 414 ITEPA 2003A taxpayer holds an employment with company A from 1 January 2000 to 31 December 2004. From 1 January 2005 to 31 December 2009 the same person holds an employment with company B, which is in the same group of companies.

On termination from company B, an ex-gratia payment within Section 401 ITEPA 2003 is made which reflects the employee’s whole service with both companies. The total period of service is then treated as 1 January 2000 to 31 December 2009.

By contrast, if the termination payment from company B was related only to compensation for the loss of that employment, the total period of service for the purposes of EIM13690 is then 1 January 2005 to 31 December 2009. This would be the case, for example, where the employee was dismissed wrongfully (see EIM12970) and the termination payment reflected only compensation for the loss of the employment with company B (see EIM13070).