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HMRC internal manual

Inheritance Tax Manual

Liabilities: investigating liabilities: redundancy payments

You may allow a deduction for lump-sum redundancy payments payable under the Employment Rights Act 1996. This applies to payments

  • for which the deceased was liable but which had not been made at the time of death, or
  • for which the personal representatives became liable as a result of the death.

Although the second type of deduction arises because of the death it is treated as a liability of the deceased employer, as if it was incurred immediately before the death. This is because an employee’s employment is treated as terminated by the death of the employer under the employment rights legislation. The deceased’s personal representatives are required to make a redundancy payment to any employee they do not offer to re-engage within eight weeks of the death.