Section 414 ITEPA 2003

Example 1

The employee is non-UK resident for the tax year in which the employment is terminated. Two out of five years total service is ‘foreign service’ (see EIM13690).

The payment is £100,000 of which £10,000 is post-employment notice pay.

Full exception under section 413 ITEPA 2003 is not available.

Foreign service reduction (see EIM13700) is calculated as follows.

Example - -
Payments and benefits within section 401 ITEPA 2003 £100,000
Post-employment notice pay (PENP) (see EIM13872) £10,000
Less foreign service reduction = £10,000 × 2 ÷ 5 (£4,000)
Amount treated as earnings by section 402B(1) ITEPA 2003 £6,000
Termination awards subject to section 403 ITEPA 2003 (see EIM13872) £90,000
Less £30,000 threshold (see EIM13700 and example EIM13980). (£30,000)
The ‘amount charged to tax’ (see EIM13700) £60,000
Less foreign service reduction = £60,000 × 2 ÷ 5 (£24,000)
Amount chargeable to income tax as specific employment income under section 403 ITEPA 2003 £36,000

Example 2

The employment commenced on 1 June 2008. The employee's contract provides for a 5-day working week with 20 days holiday – a total of 240 workdays.

Need help? Get subscribed!

To subscribe to this content, simply call 0800 231 5199

We can create a package that’s catered to your individual needs.

Or book a demo to see this product in action.