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HMRC internal manual

Employment Income Manual

Non-approved schemes: ex-gratia (voluntary) payments

Statement of Practice 13/1991

The application of Section 394 ITEPA 2003 to ex-gratia or voluntary payments made before 6 April 2006 on retirement or death is set out in Statement of Practice SP13/91. Such payments are within the scope of the Section whenever there is a scheme (see EIM15406).

However, the statement also introduced a new procedure under which certain payments could be given approved status on application to Audit & Pension Schemes Services (APSS). Where approval was given, the payment is exempt from tax.

Under the procedure an employer was able to apply to APSS either before or after the payment is made. A payment was only considered for approval by APSS where:

  • no other lump sum benefit from an approved or statutory retirement benefits scheme (see EIM15407) is payable in respect of the employment and
  • normal requirements for HMRC approval, as set out in Booklet IR12, are met (for example, the time limits for seeking approval apply).

If approval is granted by APSS, the Inspector dealing with the employer’s accounts will have been notified by that office.

The statement also granted approved status without an application to APSS in some circumstances, see EIM15425.