Taxation of Chargeable Gains Act 1992 section 263ZA

Former employees: employment-related liabilities

Section 263ZA allows a former employee who cannot fully use an income tax deduction for employment-related liabilities (because the deduction exceeds their remaining income) to convert the unused portion into an allowable capital gains tax loss, subject to certain limits.

• Where a former employee's deductible payments relating to a previous employment exceed their remaining total income for the tax year, the unused amount is known as "excess relief"
• On making a claim, the excess relief can be treated as an allowable capital loss for that tax year, reducing any capital gains tax liability
• The amount that can be converted into an allowable loss is capped at the "maximum amount" — broadly, the chargeable gains for the year before deducting brought-forward losses, the annual exempt amount, trading loss relief, and post-cessation expenditure relief
• The claim under this section can be combined in the same notice as a claim under section 555(3) of ITEPA 2003 for the underlying income tax deduction