Different elements

Tax liability of termination payment on transfer of employment

The taxpayer received a lump sum payment from his previous employer BP when he was transferred to another company under the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2006. He said it was compensation for the loss of pension rights after the termination of his employment with BP. HMRC said it was taxable under ITEPA 2003 s 62.

The First-tier Tribunal said whether the taxpayer’s employment should be treated as terminated or continuous under TUPE was irrelevant. There was no evidence that the payment was made as an inducement to enter employment with the new company or to accept any change of terms. It was to cover the loss of scheme rights with BP including pension bonus shares and lunch allowances.

The judge decided that each element of the payment should be taxed in the...