Income Tax (Earnings and Pensions) Act 2003 section 388

Apportionment of payments in respect of more than one employee

Section 388 deals with how a single payment made to a non-approved retirement benefits scheme on behalf of more than one employee should be split between those employees for tax purposes.

• Where a single lump-sum payment is made to a non-approved scheme covering multiple employees, the payment must be apportioned between them
• Each employee is only taxed on their appropriate share of the total payment, not the whole amount
• A formula is provided to determine how the apportionment is calculated between the employees concerned
• This prevents any individual employee from being overtaxed by being assessed on the full payment when it relates to several people