Income Tax (Trading and Other Income) Act 2005 section 77

Payments in respect of employment wholly in employer's trade

Section 77 allows employers a trading deduction for redundancy and similar payments to employees whose employment was wholly within the employer's trade, where no deduction would otherwise be available.

• Where a redundancy or similar payment relates to employment wholly within the employer's trade and no other deduction is available, the payment is deductible in calculating the trade's profits.
• For approved contractual payments, the deduction is capped at the amount the employee would have received had a statutory redundancy payment been payable.
• If the payment is made after the employer has permanently ceased trading, it is treated as made on the last day of trading — but this rule does not apply where at least one person carrying on the trade before a change of ownership continues to do so afterwards.
• The deduction is given in the period of account in which the payment is made, or is treated as made under the cessation rule.