HMRC have published a policy paper, 'Changes to the treatment of termination payments and post-employment notice pay for Income Tax'. This proposes to amend the rules for the calculation of Post-Employment Notice Pay on termination of employment from 6 April 2021.
- An alternative calculation will be possible in order to calculate Post-Employment Notice Pay on termination of employment.
- This will affect employees who have a pay period defined in months, but a contractual notice period defined in weeks or days, or where the post-employment notice period is not a whole number of months.
- An amendment will be made to 402D ITEPA 2003 and aims to ensure that all employees’ PENP is calculated consistently on the termination of their employment.
- There will also be an amendment to section 27 ITEPA 2003 will ensure that non-resident individuals are charged to UK tax and National Insurance Contributions on PENP, to the extent that their period of notice would have been worked in the UK.
- The changes will be published in the Finance Bill 2020-21
Termination, redundancy and leaving payments (from 6 April 2018)
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