Corporation Tax Act 2009 section 79

Additional payments

Section 79 deals with the tax deductibility of voluntary additional payments made by an employer to employees when the employer permanently ceases a trade or part of a trade.

• When an employer permanently ceases a trade (or part of one) and makes a payment to an employee over and above the statutory redundancy payment or approved contractual payment, a tax deduction may be available for that additional payment.
• The deduction is only available where the sole reason the additional payment would not otherwise be deductible is because the trade has permanently ceased — if it would have been deductible in an ongoing trade, the deduction is allowed.
• The deduction is capped at three times the amount of the redundancy payment (or, where an approved contractual payment is made instead, three times the amount that would have been due as a redundancy payment).
• If the additional payment is made after the trade has ceased, it is treated as made on the last day the employer carried on the trade or part of the trade, and the deduction falls into the accounting period in which the payment is made or is treated as made.