Income Tax (Earnings and Pensions) Act 2003 section 42-43

Payments and benefits on termination of employment etc.

Sections 42 and 43 of Schedule 7 provide transitional rules for the tax treatment of termination payments and benefits, ensuring that payments already taxed under previous legislation are not taxed again and that the £30,000 tax-free threshold is correctly applied where payments span both the old and new tax regimes.

• Termination payments or benefits received on or after 6 April 2003 that were already subject to tax before 6 April 1998 are not taxed again under the current rules
• Where a person has received termination payments under both the old rules (section 148 of ICTA) and the new rules (Chapter 3 of Part 6), the £30,000 threshold must take account of both sets of payments
• Payments received under the old rules are valued at their aggregate amount as it stood immediately before 6 April 2003, rather than being revalued under the current valuation provisions
• The definition of associated employers under section 404(2) applies when determining whether payments from different employments should be aggregated for threshold purposes