Income Tax (Earnings and Pensions) Act 2003 section 405

Exception for certain payments exempted when received as earnings

Section 405 ensures that certain payments connected with the end of an employment or a change in job duties or pay are kept outside the scope of the termination payments rules, because they would already be exempt from tax if they had been received as normal earnings.

• Payments made on termination of employment that would qualify as exempt employer contributions to an approved personal pension arrangement are excluded from the termination payments rules
• Payments made on a change in job duties or earnings that would qualify for the limited exemption for removal benefits and expenses are similarly excluded
• The exemptions apply by asking a hypothetical question: if the payment had been received for performing the duties of the employment, would it have been exempt?
• Not all historically exempt categories need listing here, because some benefits are already exempt from all employment income charges or are excluded by other provisions