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HMRC internal manual

Insurance Policyholder Taxation Manual

Sickness disability and unemployment insurance: tax treatment from 6 April 1996: employer’s schemes: where employment ends for health reasons

An employee may leave employment because of a risk that was insured against under anemployer’s policy, for example retirement on the grounds of ill-health. Benefitsmight continue to be paid to the person under a separate policy linked to theemployer’s policy and issued to replace it.

If so, the policies are treated as one for the purposes of the exemption. The new policymust have been entered into in accordance with provisions contained in the employer’spolicy and rights under the employer’s policy must have ceased to apply. But if theseconditions are met the effect is that the rules at IPTM6120 areunchanged by the employee’s departure.

Further reference and feedback IPTM1013