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HMRC internal manual

Employment Income Manual

Termination payments and benefits: example: exceptions: foreign service reduction: interaction with £30,000 threshold

Section 414(2) ITEPA 2003

An employee fails to qualify for full foreign service exception under EIM13690. The employee is non-UK resident in the tax year the employment is terminated (2018 to 2019). There is  some foreign service during the employment, so the reduction for foreign service in EIM13700 is considered.

An employee receives a termination payment within section 401 ITEPA 2003 of £100,000. To calculate the foreign service reduction, the first step is find the amount charged to tax (or, more accurately, the amount that would otherwise count as employment income, see EIM13700), as follows.

Termination payments and benefits within section 401 ITEPA 2003 £100,000
Post-employment notice pay (see EIM13874) £10,000
Termination awards subject to section 403 ITEPA 2003 (see EIM13874) £90,000
Less the £30,000 threshold (see EIM13505) £30,000
The ‘amount charged to tax’ £60,000

The reduction is then calculated using the £60,000 figure, see example EIM13985.