Income Tax (Trading and Other Income) Act 2005 section 741

Aggregation of policies where employment ends for health reasons

Section 741 ensures that when someone leaves employment due to a health event covered by their employer's insurance policy, and they then receive payments under a replacement policy that was set up under the terms of the original employment policy, the tax exemption for health and employment insurance payments continues to apply.

• Where a person leaves employment because of a health risk event insured under an employment policy, and payments continue under a replacement policy derived from the original, the two policies are treated as one for tax exemption purposes
• The replacement policy must have been entered into under provisions contained in the original employment policy, and the original policy must have ceased to apply to the person
• The rights under the replacement policy must have superseded the rights under the original employment policy from the point at which the original policy stopped covering the individual
• "Employment" includes holding an office, and "employment policy" means a policy taken out wholly or partly for the benefit of an employer's employees against a health risk

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