Chapter EIM13898

CourtHM Revenue & Customs
Record NumberEIM13898
Published date22 May 2014
Section 402E ITEPA 2003

EIM13874 explains that, with effect from 6 April 2018, the post-employment notice pay element of all ‘relevant termination awards’ is chargeable to income tax as general earnings. Post-employment notice pay is calculated using the PENP formula (see EIM13880).

There are various terms which require defining to calculate ‘BP’, ‘P’ and ‘D’ for the purposes of the PENP formula. These terms are defined below.

‘Trigger date’

If the termination is a ‘notice case’ then the trigger date is the day notice is given.

If the termination is not a ‘notice case’ then the trigger date is the last day of the employment.

The term ‘trigger date’ is required for calculating ‘BP’ (see EIM13882), ‘P’ (see EIM13886) and ‘D’ (see EIM13890).

‘Notice case’

If the either the employer, or employee gives notice to the other to terminate the employment then the termination is a ‘notice case’. In a notice case it does not matter whether the notice given by either party is more, or less than, or the same as the ‘minimum notice’ period. It also does not matter if the employment ends before the notice expires.

The term ‘notice case’ is required for calculating ‘BP’ (see EIM13882), ‘P’ (see EIM13886) and ‘D’ (see EIM13890).

‘Minimum notice’

The ‘minimum notice’ is the notice required to be given by the employer to terminate the employee’s employment, by giving notice, in accordance with the law and contractual terms.

If the termination is a ‘notice case’, the ‘minimum notice’ is the minimum notice required to be given by the employer to terminate the employee’s employment by notice in accordance with the law and contractual terms that were effective immediately before notice is given.

If the termination is not a ‘notice case’, the ‘minimum notice’ is the minimum notice required to be given by the employer to terminate the employee’s employment by notice in accordance with the law and contractual terms that were effective immediately before the employment ends, or where the employment ends by agreement entered into after the start of the employment, immediately before the agreement is entered into.

The term ‘minimum notice’ is required for calculating ‘BP’ (see EIM13882), ‘P’ (see EIM13886) and ‘D’ (see EIM13890).

‘Post-employment notice period’

The ‘post-employment notice period’ is the period beginning at the end of the last day of employment and ending with the ‘earliest lawful termination date’.

The term ‘post-employment notice period’ is required for...

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