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HMRC internal manual

Employment Income Manual

Non-approved schemes: receipts excluded from charge: prior employer contributions

Sections 395(2) and (4) and 396 ITEPA 2003

There is no charge under Section 394 ITEPA 2003 if the receipt is attributable to prior employer contributions on which the employee has been taxed under Section 595(1) ICTA 1988 (see SE15040) or Section 386 ITEPA 2003 (see EIM15412 and example EIM15438).


  • Section 396(2) ITEPA 2003 places the onus on the person receiving a lump sum to show that the amount paid is attributable to contributions that have been taxed.
  • FA 1994 introduced important exceptions to this rule to deter avoidance of tax, see EIM15416.
  • Attributing lump sums from the scheme to contributions is a matter of fact. This should be done on any reasonable basis and excessive time should not be spent on this (see example EIM15438).