News

Changes to tax treatment of termination payments

The government has published draft clauses for insertion into a new Finance Bill 2020-21, to be introduced into Parliament in the Autumn. These include changes which will affect employers who make termination payments.

The part of a termination payment which is treated as being a payment in respect of the employee’s notice period and subject to income tax and NICs is called the “post-employment notice pay” (PENP). The provisions will provide an alternative PENP calculation where an employee’s pay period is defined in months, but their contractual notice period is defined in weeks or days, or where the post-employment notice period is not a whole number of months. This will ensure that all employees’ PENP is calculated consistently on the termination of their employment.

The provisions will also bring PENP within the charge to UK tax for individuals who are non-resident in the year of termination of their UK employment.

The measures will take effect from 6 April 2021 and will apply to those employees who both have their employment terminated and receive a termination payment on or after 6 April 2021. Since October 2019, HMRC has, in any event, exercised managerial discretion to provide for an alternative calculation for PENP for use where it’s advantageous to the employee and this will continue to apply until 6 April 2021.
 

Source: HM Revenue & Customs Thu, 30 Jul 2020 05:00:00 +0100

Newsletter

With our newsletter, you automatically receive our latest news by e-mail and get access to the archive including advanced search options!

> SIGN UP FOR THE NEWSLETTER
> LOGIN

Some accountancy websites also provide pages and pages of tax information, helpsheets, etc. We prefer to give clients personally tailored advice. So, if you want details of tax rates and allowances just go to the HMRC website on which you should find what you’re looking for. If you need more individual advice please contact us.

Below are links to websites you may find of interest, but as we like to support our local community and clients, we have included links to websites that may be of interest:

HMRC
FT
BBC
VEALE WASBROUGH VIZARDS
CESP
PRACTICE INDEX
SIMCOMM ACADEMY

More Local:
FOOTPLATE EXPERIENCE
ANGLEBURY PRESS
OFFCAMBER.CO.UK