»Ê¹ÚÌåÓýapp

S79, S79A Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), S79, S80 Corporation Tax Act 2009 (CTA 2009)

A statutory deduction is allowable for additional payments to redundant employees, up to a maximum of three times the amount of the statutory redundancy payment (or, where an approved contractual payment is made, three times the amount that would have been due if a statutory redundancy payment had been payable). In other words, if the statutory payment is £1,000, additional payments may be deducted up to a maximum of £3,000.

»Ê¹ÚÌåÓýapp conditions for the relief are:

• there must first be entitlement under S76 ITTOIA 2005 (where the employer is subject to Income Tax) or S76 CTA 2009 (where the employer is a company),
• the additional payment would be allowable as a deduction on general principles (see BIM47200) but for the permanent discontinuance of the trade or part of the trade.

A change in the persons carrying on the trade is treated as a permanent discontinuance of the trade for this purpose unless there is at least one person who carried on the trade both immediately before and after the change.

»Ê¹ÚÌåÓýapp deduction applies only to payments to a redundant employee which would satisfy the ‘wholly and exclusivelyâ€� test at BIM37000 onwards but for the discontinuance of the trade. Payments made as part of a bargain for a sale of shares (as in George Peters & Co Ltd v Smith [1963] 41TC264,see BIM42955) do not qualify for the relief.

Timing of deductions

Guidance on timing of deductions is at BIM47215.