Commentary on Sections Example 3 Ne = £5,000; Da = 183; De = 183; Smg = 0 Section 403: Charge on payment or other benefit
1755.This section contains the charge to tax on termination payments and benefits where they exceed the £30,000 threshold.
1756.Subsections (1) and (4) set out the basis of the charge, the threshold and when amounts are to be taken as exceeding it. These provisions derive from section 148(1) and (3) of, and paragraphs 7(2) and 14(1) of Schedule 11 to, ICTA. Amounts brought into charge by virtue of this section come within “specific employment income” in section 7(4) of this Act. Section 6(3) of this Act provides that the rules in Chapters 4 and 5 of Part 2 do not apply to specific employment income. That derives from section 19(1), paragraph 5 of ICTA and the case of Nichols v Gibson CA 1996 at 68 TC 611.
1757.Subsections (2) and (3) set out the rules for the timing of the charge to tax, and the time when benefits are treated as received. The rules are similar to the receipts basis for earnings. In cases where payments are made over a period of time, or benefits are provided for some time after the employment has terminated, once the £30,000 threshold has been exceeded, there will be continuing liability as long as payments continue to be made or benefits provided. These provisions derive from section 148(3) and (4) of ICTA.
1758.Subsections (5) and (6) make clear who is liable for a tax charge arising by virtue of this Chapter, both in the ordinary course of events and if a payment or benefit is received after the death of the employee or former employee. The latter circumstances are covered by subsection (5), which derives from paragraph 14(2) of Schedule 11 to ICTA. “Personal representatives” is defined in section 721 of this Act. See Change 159 in Annex 1.