Income and Corporation Taxes Act 1988

579 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 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—

(a) 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

(b) 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 75 or 76—

(a) 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

(b) 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 the provisions of section 25(1) or 28—

(a) 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 those provisions) be treated for the purposes of those provisions 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

(b) if the employer’s payment was made after the latest time when it could be taken into account for the purposes of relief under those provisions 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) above, or otherwise, more than once in respect of any employer’s payment, and if the employee was being employed in such a way that different parts of his remuneration fell for tax purposes to be treated in different ways—

(a) 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

(b) subsections (2), (3) and (4) above shall apply separately to the employment in those capacities, and by reference to the apportioned part of that 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 106 of the [1978 c. 44.] Employment Protection (Consolidation) Act 1978 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—

(a) that sum had been paid on account of that redundancy or other employer’s payment, and

(b) so far as the employer has reimbursed the Minister, it had been so paid by the employer.