HL Deb 13 November 1991 vol 532 c34WA
Earl Russell

asked Her Majesty's Government:

Whether it is true, as reported in the Independent (2nd November, 1991) that the Inland Revenue now intends to treat ex-gratia payments on early retirement as taxable income, and if so, what is the legal basis for this step.

The Minister of State, Department of Transport (Lord Brabazon of Tara)

The article arises fromStatement of Practice SP 13/91 published by the Inland Revenue on 31st October 1991. The statement was necessary as legal advice had shown existing published practice was incorrect. The change does not affect the current tax treatment of payments by tax approved pension schemes. Nor are severance payments on genuine redundancy or loss of office affected. The statement clarifies that ex-gratia payments made on retirement or death will be taxable in full unless the arrangement is tax approved. This gives consistent tax treatment for all forms of retirement arrangement. Copies of the statement of practice have been placed in the Library.