Income Tax (Earnings and Pensions) Act 2003 section 555

Former employee entitled to deduction in calculating net income

Section 555 sets out the circumstances under which a former employee becomes entitled to a tax deduction for certain payments made after their employment has ended.

• A deduction may arise where a former employee makes a deductible payment themselves, or where a former employer makes one on their behalf that is treated as a relevant retirement benefit or as post-employment earnings
• The deductible payment can be subtracted when calculating the former employee's net income for the tax year in which the payment is made
• The deduction is only available if the former employee makes a formal claim for it, and is subject to further conditions in sections 556 and 557 regarding time limits and payments borne by the former employer
• Where the deduction exceeds the former employee's remaining total income, capital gains tax relief may be available under section 263ZA of TCGA 1992