Corporation Tax Act 2009 section 81

Payments made by the Government

Section 81 deals with the tax treatment of redundancy and approved contractual payments where the Government, rather than the employer, initially makes the payment to the employee.

• Where an employer is liable for a redundancy payment or approved contractual payment, the Government (Secretary of State or Department for Employment and Learning) may step in and pay the employee directly
• If the employer reimburses the Government for such a payment, the employer can claim a trading deduction as though it had made the payment directly to the employee
• The normal rules for deducting redundancy payments and approved contractual payments from trading profits apply equally to these reimbursements
• This provision covers payments made under the Employment Rights Act 1996 (section 167) in Great Britain and the Employment Rights (Northern Ireland) Order 1996 (Article 202) in Northern Ireland