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HMRC internal manual

Employment Income Manual

Deductions: directors’ and officers’ liabilities: relief for ex-employees: relief for "excess" liabilities

Section 555(6) and 556A ITEPA 2003, Section 67 FA 2009

If the deduction due for a year under Section 555(6) ITEPA 2003 exceeds the ex-employee’s total income in that year the excess is treated for capital gains tax purposes as an allowable loss accruing for that year.

However, that loss can be used only to off-set the excess (if any) of actual gains arising over losses incurred in the year (see CG15803).

No deduction is allowed for a payment that would otherwise meet the conditions of section 555 if it is made in pursuance of arrangements the main purpose, or one of the main purposes of which, is the avoidance of tax.