Part IIConsequential amendments
Income and Corporation Taxes Act 1988 (c. 1)
1(1)Section 189 of the Taxes Act 1988 (exemption from Schedule E charge of lump sum payments under approved retirement benefits schemes, etc) is amended as follows.
(2)Make the existing provision subsection (1).
(3)In paragraph (a) of that subsection for the words from “and is neither” to “section 600” substitute “and is not excepted from this paragraph by subsection (2) or (3) below”.
(4)After that subsection insert—
“(2)Subsection (1)(a) above does not apply to a payment of compensation for loss of office or employment, or for loss or diminution of emoluments, unless—
(a)the loss or diminution is due to ill-health, or
(b)the payment is properly regarded as earned by past service.
(3)Subsection (1)(a) above does not apply to a payment chargeable to tax under section 600 (payments not authorised by rules of scheme).”.
2In section 190 of the Taxes Act 1988 (payments to MPs and others exempt from tax as emoluments), for the words from “but without prejudice” to the end substitute “but without prejudice to any charge to tax under section 148”.
3In section 202B(8) of the Taxes Act 1988 (receipts basis of assessment), for “143(1)(a) or 148(4)” substitute “or 143(1)(a)”.
4In section 833(3)(a) of the Taxes Act 1988 (calculation of top slice of a person’s income), after “payment” insert “or other benefit”.
Finance Act 1995 (c. 4)
5In section 92 of the Finance Act 1995 (post-employment deductions), for subsection (10) substitute—
“(10)Tax shall not be charged under section 148 of the Taxes Act 1988 (payments and other benefits in connection with termination of employment etc) in respect of a payment or other benefit received by an individual, or an individual’s executors or administrators, in so far as—
(a)in the case of a cash benefit, it is provided for meeting the cost of an amount to which this subsection applies, or
(b)in the case of a non-cash benefit, it is or represents a benefit equivalent to the cost of defraying such an amount.
This subsection applies to an amount which, without being an amount to which this section applies, would fall to be treated as such an amount if subsection (4) of this section were omitted and, where the individual has died, he had not died but had himself defrayed any amounts defrayed by his executors or administrators.”.