Income Tax (Earnings and Pensions) Act 2003

558 Meaning of “deductible payment”

(1) For the purposes of this Part each of the following is a deductible payment—

1.

Payment in or towards the discharge of a liability related to the former employment.

2.

Payment of any costs or expenses incurred in connection with—

(a)

a claim that the former employee is subject to a liability related to the former employment, or

(b)

proceedings relating to or arising out of a claim that the former employee is subject to a liability related to the former employment.

3.

Payment of a premium under a qualifying insurance contract, but only to the extent that the premium relates to—

(a)

provision in the contract for the former employee to be indemnified against a payment falling within paragraph A, or

(b)

provision in the contract for the payment of any costs or expenses falling within paragraph B.

(2) But a payment which falls within paragraph A or B is not a deductible payment if it would have been unlawful for the former employer to enter into a contract of insurance in respect of the liability, or costs or expenses, in question.

(3) In this Part—

(a) “premium”, in relation to a qualifying insurance contract, means an amount payable to the insurer under the contract, and

(b) where a qualifying insurance contract relates to more than one person, employment or risk, the part of the premium to be treated as relating to each of them is to be determined by apportionment on a just and reasonable basis.