Income Tax (Trading and Other Income) Act 2005 section 78

Payments in respect of employment in more than one capacity

Section 78 deals with how redundancy payments should be apportioned where an employee works for the same employer partly in the employer's trade and partly in one or more other capacities.

• This section applies where an employee's role with the employer spans both the employer's trade and one or more other capacities, such as private or non-trade functions.
• The redundancy payment (or the amount that would have been due if a redundancy payment had been payable) must be split on a just and reasonable basis between the trade element and the other capacities.
• The portion apportioned to the trade is then treated as though it were a payment for employment wholly in the trade, allowing it to be deducted in calculating trade profits under section 77.
• The just and reasonable basis of apportionment is a standard approach used consistently throughout the Act, replacing the previous legislation which did not specify a basis for dividing the payment.