Income and Corporation Taxes Act 1988

188 Exemptions from section 148

(1) Tax shall not be charged by virtue of section 148 in respect of the following payments, that is to say—

(a) any payment made in connection with the termination of the holding of an office or employment by the death of the holder, or made on account of injury to or disability of the holder of an office or employment;

(b) any sum chargeable to tax under section 313;

(c) a benefit provided in pursuance of a retirement benefits scheme within the meaning of Chapter II of Part IX of the 1970 Act or Chapter I of Part XIV of this Act or of an agreement as described in section 220(2) of the 1970 Act, where under section 220 of that Act or section 595 of this Act the holder of the office or employment was chargeable to tax in respect of sums paid, or treated as paid, with a view to the provision of the benefit;

(d) a benefit paid in pursuance of any such scheme or fund as was described in section 221(1) and (2) of the 1970 Act or as is described in section 596(1);

(e) any terminal grant, gratuity or other lump sum paid under any Royal Warrant, Queen’s Order, or Order in Council relating to members of Her Majesty’s forces, and any payment made in commutation of annual or other periodical payments authorised by any such Warrant or Order;

(f) a payment of benefit under any superannuation scheme administered by the government of an overseas territory within the Commonwealth, or of compensation for loss of career, interruption of service or disturbance made in connection with any change in the constitution of any such overseas territory to persons who, before the change, were employed in the public services of that territory;

and references in paragraph (f) above to an overseas territory, to the government of such a territory, and to employment in the public service of such a territory shall be construed as if they occurred in the [1980 c. 63.] Overseas Development and Cooperation Act 1980, and sections 10(2) and 13(1) and (2) of that Act (which relate to the construction of such references) shall apply accordingly.

(2) Subsection (1)(d) above shall not apply to any compensation paid for loss of office or employment or for loss or diminution of emoluments unless the loss or diminution is due to ill-health; but this subsection shall not be taken to apply to any payment properly regarded as a benefit earned by past service.

(3) Tax shall not be charged by virtue of section 148 in respect of any payment in the case of which the following conditions are satisfied—

(a) that the payment is in respect of an office or employment in which the holder’s service included foreign service; and

(b) that the foreign service comprised either—

(i) in any case, three-quarters of the whole period of service down to the relevant date, or

(ii) where the period of service down to the relevant date exceeded ten years, the whole of the last ten years, or

(iii) where the period of service down to the relevant date exceeded 20 years, one-half of that period, including any ten of the last 20 years.

(4) Tax shall not be charged by virtue of section 148 in respect of a payment of an amount not exceeding £25,000 (“the exempt sum”) and, subject to subsection (5) below, in the case of a payment which exceeds that amount shall be charged only in respect of the excess.

(5) Where two or more payments in respect of which tax is chargeable by virtue of section 148, or would be so chargeable apart from subsection (4) above, are made to or in respect of the same person in respect of the same office or employment, or in respect of different offices or employments held under the same employer or under associated employers, subsection (4) above shall apply as if those payments were a single payment of an amount equal to that aggregate amount; and the amount of any one payment chargeable to tax shall be ascertained as follows, that is to say—

(a) where the payments are treated as income of different chargeable periods, the exempt sum shall be deducted from a payment treated as income of an earlier period before any payment treated as income of a later period; and

(b) subject to that, the exempt sum shall be deducted rateably from the payments according to their respective amounts.

(6) The person chargeable to tax by virtue of section 148 in respect of any payment may make a claim for such relief in respect of the payment as is applicable thereto under Schedule 11.

(7) For the purposes of this section and Schedule 11 offices or employments in respect of which payments to which section 148 applies are made shall be treated as held under associated employers if, on the date which is the relevant date in relation to any of those payments, one of those employers is under the control of the other or of a third person who controls or is under the control of the other on that or any other such date.

In this subsection “control” has the meaning given by section 840.

(8) In this section—

(a) “the relevant date” and “foreign service” have the same meaning as in Schedule 11; and

(b) references to an employer or to a person controlling or controlled by an employer include references to his successors.