Finance Act 1966

38 Statutory redundancy payments.

(1) Any redundancy payment, and the corresponding amount of any other employer's payment, shall be exempt from income tax under Schedule E.

(2) Where a redundancy payment or other employer's payment is made in respect of employment wholly in a trade, profession or vocation carried on by the employer, and within the charge to income tax or corporation tax, the amount of the redundancy payment or the corresponding amount of the other employer's payment shall (if not otherwise so allowable) be allowable as a deduction in computing for the purposes of Schedule D the profits or gains or losses of the trade, profession or vocation, but if it is so allowed by virtue of this section the amount of the rebate recoverable shall (if it is not otherwise to be so treated) be treated as a receipt to be brought into account in computing those profits or gains ; and if the employer's payment was made after the discontinuance of the trade, profession or vocation the net amount so deductible shall be treated as if it were a payment made on the last day on which the trade, profession or vocation was carried on.

(3) Where a redundancy payment or other employer's payment is made in respect of employment wholly in a business carried on by the employer, and expenses of management of the business are eligible for relief under section 57 of the [1965 c. 25.] Finance Act 1965 as extended by section 67(1)(b) of that Act (investment companies and unit trusts) the amount by which the redundancy payment, or the corresponding amount of the other employer's payment, exceeds the recoverable rebate shall (if not otherwise so allowable) be allowable as expenses of management eligible for relief under that section; and if the employer's payment was made after the discontinuance of the business the net amount so allowable shall be treated as if it were expenses of management incurred on the last day on which the business was carried on.

(4) Where a redundancy payment or other employer's payment is made in respect of employment wholly in maintaining or managing property the expenses of maintaining or managing which were eligible for relief under paragraph 1 or paragraph 13 of Schedule 4 to the [1963 c. 25.] Finance Act 1963 (allowable deductions for tax under Case VIII and certain other tax), the amount by which the redundancy payment or the corresponding amount of the other employer's payment exceeds the recoverable rebate shall (if not otherwise allowable under that Schedule) be treated for the purposes of the said Schedule as a payment made by the employer in respect of the maintenance or management of the property, or of such part of it as he may elect; and if the employer's payment was made after the latest time when it could be taken into account for the purposes of relief under the said Schedule 4 as a payment in respect of the maintenance or management of the property or any part of it, it shall be treated as having been made at that time.

(5) Relief shall not be given under subsections (2), (3) and (4) of this section, or otherwise, more than once in respect of any employer's payment, and if the employee was being employed by the employer in such a way that different parts of the employee's remuneration fell for income tax or corporation tax purposes to be treated in different ways, the amount by which the redundancy payment, or the corresponding amount of the other employer's payment, exceeds the recoverable rebate shall be apportioned to the different capacities in which the employee was employed, and subsections (2), (3) and (4) above shall apply separately to the employment in those capacities, and by reference to the apportioned part of the said amount, instead of by reference to the full amount of the employer's payment, and the full amount of the rebate.

(6) Where the Minister pays a sum under section 32 of the [1965 c. 62.] Redundancy Payments Act 1965 or section 42 of the [1965 c. 19 (N.I.).] Contracts of Employment and Redundancy Payments Act (Northern Ireland) 1965 in respect of an employer's payment this section shall apply as if that sum had been paid on account of that redundancy or other employer's payment and, so far as the employer has reimbursed the Minister, as if it had been so paid by the employer.

(7) In this section " redundancy payment", " employer's payment " and " rebate " have the same meaning as in Part II of the Redundancy Payments Act 1965 or Part III of the Contracts of Employment and Redundancy Payments Act (Northern Ireland) 1965, and—

(a) references to the corresponding amount of an employer's payment (other than a redundancy payment) are references to the amount of that employer's payment so far as not in excess of the amount of the relevant redundancy payment (and so that where in consequence of section 30(2) of the Redundancy Payments Act 1965 or section 40(2) of the said Act of Northern Ireland, there is no relevant redundancy payment, the corresponding amount of the employer's payment is nil),

(b) " relevant redundancy payment" shall be construed in accordance with paragraph 8 of Schedule 5 to the [1965 c. 62.] Redundancy Payments Act 1965 or paragraph 8 of Schedule 6 to the said Act of Northern Ireland,

and a source of income is " within the charge to " income tax or corporation tax if that tax is chargeable on the income arising from it, or would be so chargeable if there were any such income.

(8) In subsection (1) above the reference to tax under Schedule E does not include a reference to tax under section 37 of the [1960 c. 44.] Finance Act 1960 (which relates only to sums exceeding a limit of £5,000 or more) and accordingly payments exempted by subsection (1) above may be taken into account under that section.

(9) This section shall apply as respects payments made on or after 6th December 1965 (which is the appointed day under the Redundancy Payments Act 1965 and the said Act of Northern Ireland), and as respects tax for past years of assessment and profits tax chargeable accounting periods, and the reference in subsection (3) of this section to section 57 of the [1965 c. 25.] Finance Act 1965 includes a reference to section 425 of the [1952 c. 10.] Income Tax Act 1952 as extended by section 438 of that Act and section 69 of the Finance Act 1960 (all of which are repealed by the Finance Act 1965).