Schedule 1: Consequential Amendments Income Tax (Earnings and Pensions) Act 2003 Paragraph 592: section 325A of ITEPA
3504.This new section of ITEPA gives a person receiving payments under an insurance policy which insures against a health and employment risk exemption from taxation on those payments as employment income.
3505.This rewrites section 580A(7) of ICTA to the extent that it relates to employment income.
3506.The payment must first have the capacity for exemption under section 735 (health and employment insurance payments) on the assumption that it is an annual payment (and thus exempt under that section). But it must also meet two further conditions.
3507.First the payments must be to an employee (or to his or her spouse) who contributed under a policy that another person took out for his or her benefit and secondly the payments must represent the contributions the employee has made.